equilibrium-ho_003

# equilibrium-ho_003 - Marginal Revenue Competitive...

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Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Equilibrium (Chapter 16)

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Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Today Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax
Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Midterm Next Week Covers material up to end of this week: chapters 12,14,15,16 Approx. 8 multiple choice, 2 blue-book In class on Tuesday Bring scrantron, bluebook, pencil (and pen) Returned in section (or OH) following week See syllabus, FAQ for more details, policies

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Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Marginal Revenue Q: Why is the MR curve always below D ? A: Lower price to sell additional unit; earn extra p on additional unit, but lose revenue w/ lower price on all previous units. R = pq = MR = d R d q = p · 1 + q d p d q Kale Price MR
Marginal Revenue Competitive Equilibrium Comparative Statics Quantity Tax Marginal Revenue Linear demand: p ( q ) = a - bq (inverse demand) Bats Price MR a a/2 a/(2b) Unit elasticity MR = a - 2 bq , so revenue maximizing ( p , q ) = ( a 2 , a 2 b ).

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Competitive Equilibrium Comparative Statics Quantity Tax Competitive Equilibrium: Motivating Questions Firms are ‘price-takers’ in competitive markets, but how is the market price (and quantity) determined? competitive equilibrium What happens to equilibrium price and quantity when either supply or demand changes? comparative statics What are the eﬀects of taxes and subsidies on prices and quantities? What are the welfare eﬀects of taxes and subsidies? deadweight loss, tax incidence
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## This note was uploaded on 12/26/2011 for the course ECON 100B taught by Professor Kilenthong during the Fall '08 term at UCSB.

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equilibrium-ho_003 - Marginal Revenue Competitive...

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