Macroeconomics Notes

Macroeconomics Notes - Macroeconomics Principle#6 markets...

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Macroeconomics 1/21/11 Principle #6: markets usually allocate resources efficiently *Ex: apples, tables, pens, clothing draft Vietnam- command process Market process- demand soldiers increase, wage increase *Ex. Non market process- Arranged marriage *Market Process: dating Principle #7: Government sucks, but sometimes it can improve market outcomes *Market Failure- mkt. fails to allocate resources efficiently (1). Externalities A. Negative Externality: spill over cost, AKA a cost pushed off onto a bystander Marginal Benefit(social entire)= MB (private) Marginal Cost (SE)= MC(private) + MC (external) Ex. Smoking, Pollution, Cars - Factory: too much produced/consumed (internalize the externality) B. Positive Externality: no spill over benefit MC(Social) = MC(private) MB(Social Entire)= MB( private) + MB External Ex. Flu shots *too few production/consumption -Subsidize Ex. Farmers, Edu, Art (2). Market Power- power set price p=price q=quantity *Monopoly: - Pmonopoly > Pcompetition -Qmonopoly < Qcompetition
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This note was uploaded on 06/10/2011 for the course ECON 2105 taught by Professor Rudbeck during the Spring '08 term at UGA.

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Macroeconomics Notes - Macroeconomics Principle#6 markets...

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