Class+13+Partial+Equilbrium+III+_Second+Welfare+Theorem%2C+Taxes%2C+Monopoly_

Class+13+Partial+Equilbrium+III+_Second+Welfare+Theorem%2C+Taxes%2C+Monopoly_

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Partial Equilibrium III: Taxes, Second Welfare Theorem, Monopoly
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Allocations: Good? Feasible? Competitive? Allocation An allocation x = [q s , q d , ,m] . Allocations: what we care about. Feasible Allocation An allocation x= [q s , q d , ,m] is feasible if: (i) q s q d All limes are produced (ii) Y – c(q s ) + m Money (endowment) is used to produce the limes, c(q s ), to pay profit, , and to consume m . Preferences Consumer and firm have preferences over allocations. Firm: The more money ( profit ) the better. Consumer: Whatever maximizes U=m + v(q)
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