Lecture 24 - ECONOMICS 100A Professor Dan Acland Lecture 24...

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ECONOMICS 100A Professor Dan Acland 11/18/10 Lecture 24 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy, or illegally distribute (electronically or otherwise) these notes. Our student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. ICLICKER QUIZ ANNOUNCEMENTS Slide : Announcements 1. Problem Set #6 will be posted tomorrow, and is due Thursday, Dec. 2 (Two weeks from today.) 2. I will not hold my office hours next Tuesday, but I will hold office hours the following Tuesday (November 30 at 2-4pm). LECTURE Slide : Lecture outline: Monopoly 1. What makes a monopoly a monopoly: market power. 2. Computing marginal revenue. 3. Profit maximization in the presence of market power. 4. Deadweight loss and markup. 5. Natural monopoly. I want to start by saying that this is a topic that may strike some undergraduate students as not super relevant. You may ask questions like “Why are we talking about this?”, “How often is it really the case that there is only one firm in an industry?”, and “Does it really make a difference if we jack up the prices a little bit, if price-gouging is going on everywhere?” I just want to offer a little historical background: the “birth date” of modern economics, as we know it, is often thought to be 1776 when Adam Smith published The Wealth of Nations . Modern economics is neoclassical economics, while The Wealth of Nations is classical economics. But that‟s when the roots of the formalistic approach were taken. At that time, there were a handful of very first order economic and social issues that economists were particularly concerned with. One of them was “Why are some nations wealthier than others?” If you‟re a British person and your nation happens to be involved in trying to take over the planet, that‟s an obvious topic of interest. But there was something else going on in the process of imperialism and colonialism of particular interest to Smith and other economists, which was that the government of England (and maybe also Holland and other imperialist nations) was granting monopolies to the big trading companies that were going out and colonizing. The East India Company, for example, was a government-granted monopoly. This was an issue that Smith and other economists were adamant were not beneficial to the wealth of any nation. We‟ll see why, in fact, the issues remain pertinent even long after those kinds of governments and monopolies have been disbanded for a couple of important reasons. Slide
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Lecture 24 - ECONOMICS 100A Professor Dan Acland Lecture 24...

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