ch11.ppt-me - REGULATION PUBLIC GOODS BENEFIT-COST ANALYSIS...

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REGULATION, PUBLIC GOODS, Chapter 11 slide 1 Competitive Markets Provide the “Right” amounts of Goods and Services that People Want and at Least Cost. Government Regulation is intended to remedy several kinds of Market Failure: 1. Monopoly 2. Externalities, and 3. Imperfect Information Perfectly Competitive Markets do not require regulation. Recall the message of Chapter 7:
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Market Failure due to Monopoly 11.2 Output Price Industry Demand Unit Cost E Q C P C Q M P M π M C. S. DWL M By raising price and limiting output, monopoly generates a deadweight loss (relative to the social optimum of perfect competition).
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Market Failure due to Monopoly 11.3 Antitrust measures are intended to prevent the emergence of monopoly and restore competition to a monopolistic industry. 1. Breaking Up Monopolies 2. Preventing Monopolies from Arising 3. Preventing Mergers that Reduce Competition 4. Preventing Price Fixing
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0 2 4 8 10 12 $9 8 7 6 5 4 3 2 1 0 INDUSTRY DEMAND MTC MC ExternalCost
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ch11.ppt-me - REGULATION PUBLIC GOODS BENEFIT-COST ANALYSIS...

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