lec25 - social welfare Comp Monopoly Now future years 25...

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4 Growth comes from: Larger labor supply More capital Increased productivity 5 Growth per capita comes from: More capital Increased productivity 10 Policies to induce growth: Better education for more people Stimulate investment Increase research and development Induce people to save more 15 MACROECONOMICS Expansionary fiscal policy hurts growth. G up Y up r up I down Expansionary monetary policy helps growth. M S up r down I up 16 MACROECONOMICS Use fiscal policy only as short-term solution to the liquidity trap. 19 Microeconomics Monopoly: Competition: Cannot reap benefits of R&D
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22 Social welfare over time:
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Unformatted text preview: social welfare Comp. Monopoly Now future years 25 Antitrust laws: Monopoly gained through innovation is not illegal. Monopoly is reward for innovation. Possibility of monopoly is incentive for R&D. 26 Even monopolist will invest too little in R&D. 27 Monopolist’s profit from a new product: $ Q P M Q M MR D MC 28 Social surplus from a new product: $ Q P M Q MR D MC 31 Example: Monopolist profits $75 million Consumer surplus $25 million Social surplus $100 million R&D costs $90 million It is socially desirable to make this investment. But monopolist will not make the investment....
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lec25 - social welfare Comp Monopoly Now future years 25...

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