econ101w0719 - Introductory Economics Economics 101-300...

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(c) Sherrie A. Kossoudji Introductory Economics Economics 101--300 Lecture # 19 Sherrie A. Kossoudji If you print the preliminary version of these slides before class, please be aware that they are likely to change right up to class time.
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(c) Sherrie A. Kossoudji Please remember that reading these slides does not substitute for attending class. These slides are merely outline guides for what is discussed during the lecture.
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(c) Sherrie A. Kossoudji Schedule: Week 11 WEEK 13: WEEK OF MARCH 26 TH Lecture #: 20-21 Discussion #: 10 Anderson: Chapter 14, Anderson: Chapter 11 Subjects/Concepts: Externalities, private and social costs Public good and common resources Readings: This week: Next week: KW Chapter 19, KW Chapter 20 Complete KW Chapter 19 and KW Chapter 20 if necessary, KW Chapter 21 Homework: Graded: Ungraded: Chapter 16, problem set II Chapter 19 problem set I; Chapter 20, problem set I Section Quizzes: None Exams: None Other Important Information: None
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(c) Sherrie A. Kossoudji Sherrie’s extra office hours I will announce extra office hours each week until the final on Tuesday’s lecture. This week’s extra office hours are today from 3:00 until 4:30.
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(c) Sherrie A. Kossoudji Remember efficiency? Efficient outcomes are good. Why? In a competitive market, P=MC Remember that one characteristic of an efficient market is that you can’t make any person better off without making someone else worse off. The converse of this is that if the market is inefficient, you can make someone better off without making someone else worse off.
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(c) Sherrie A. Kossoudji The controversy over government’s role Is there a real and important ECONOMIC role for government? Adam Smith said no—he claimed that the government could never do as much social good as many individuals who are trying to help themselves. Smith’s “invisible hand” described this process. Many economists argue that the only significant role of the government is to mitigate the excesses or failures of the market. There are probably as many opinions among economists as in the rest of the population.
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Why does the government get involved with the economy? The profit motive provides the private sector with strong incentives to be efficient, reduce costs, and produce what consumers want. So…what’s the problem? The profit motive also means that there is too much produced of some goods (bads—like air pollution), there is too little produced of some necessary goods (quality child care). The profit motive also means that some people gain and some lose. For some goods, the private and social cost of production are different. There are some goods where it is impossible to profit and so
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This note was uploaded on 04/04/2008 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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econ101w0719 - Introductory Economics Economics 101-300...

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