lec24 - Equilibrium with free entry and exit: MC AC REVIEW...

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1 REVIEW MICROECONOMICS MACROECONOMICS 4 COMPETITION Free entry and exit: P = AC Firm cannot affect market price: P = MC 5 P = AC = MC implies P = minAC p* Q AC MC 6 Equilibrium with free entry and exit: P** q** MC AC D Firm Market Q** 9 MONOPOLISTIC COMPETITION Free entry and exit: P = AC Firms’ output decisions affect prices: P > MC 10 P = AC > MC implies P > minAC p Q AC MC
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11 Demand Curve is tangent to AC p Q AC MC D 14 MONOPOLY Entry and exit are not free: P > AC Firm’s output decision affects its price: P > MC 15 $ Q D P* Q* MR MC AC AC* Monopolist’s output and price 16 Public Policy for Cars 21 Vehicle Use Externalities: Pollution Global warming Local toxins Dependence on foreign oil Congestion Roads are public good 22 Policies Gas tax Fuel efficiency standards New concept: Feebates
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24 Vehicle miles traveled (VMT) Fuel efficiency of vehicle (mpg) Fuel consumption 10,000 miles / 25 mpg = 400 gallons 26 Gas Tax Revenues fund road construction and maintenance. Drivers pay in proportion to fuel use.
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This note was uploaded on 10/09/2011 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at University of California, Berkeley.

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lec24 - Equilibrium with free entry and exit: MC AC REVIEW...

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