Lecture+17+November+3

Lecture+17+November+3 - Todays Agenda Monopoly Inefficiency...

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Today’s Agenda Monopoly Inefficiency of monopoly Natural monopoly Price discrimination Measuring market power Oligopoly
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When a firm with monopoly power is maximizing profit, A. P = SATC > SMC B. P = SMC > MR C. P > MR = SMC D. P = SMC = SATC E. P > MR = SATC
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What is the allocatively efficient industry output? For allocative efficiency, we want MB social = MC social . Perfect competition leads to allocative efficiency.
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social .
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social . MB social = MB private No spillovers in consumption benefits
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social . MB social = MB private = P Utility maximizing consumers No spillovers in consumption benefits
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social . MB social = MB private = P = MR Price-taking behavior by firms in perfect competition Utility maximizing consumers No spillovers in consumption benefits
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social . MB social = MB private = P = MR = MC private Price-taking behavior by firms in perfect competition Utility maximizing consumers Profit maximization No spillovers in consumption benefits
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How perfect competition leads to allocative efficiency For efficiency, we want MB social = MC social . MB social = MB private = P = MR = MC private = MC social Price-taking behavior by firms in perfect competition Utility maximizing consumers Profit maximization No spillovers in consumption benefits No spillovers of costs beyond firm
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MB social = MB private = P > MR = MC private = MC social Downward- sloping demand when firm has power over price Utility maximizing consumers Profit maximization
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This note was uploaded on 10/25/2011 for the course ECONOMICS 01:220:102 taught by Professor Prusa during the Fall '10 term at Rutgers.

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Lecture+17+November+3 - Todays Agenda Monopoly Inefficiency...

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