s surplus A B Change in welfare A C A B C B Inefficiency occurs because less is

S surplus a b change in welfare a c a b c b

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s surplus = A - B ± Change in welfare = - A - C + A - B = -C - B ± Inefficiency occurs because less is purchased Quantity $/Q MV ME S = AE Q* P* P C Q C B C Deadweight Loss Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 93 Monopsony Power ° Bilateral Monopoly ± Bilateral monopoly is rare, however, markets with a small number of sellers with monopoly power selling to a market with few buyers with monopsony power is more common. The Social Costs of Monopsony Power Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 94 Monopsony Power ° Question ± In this case, what is likely to happen to price? The Social Costs of Monopsony Power Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 95 Limiting Market Power: The Antitrust Laws ° Antitrust Laws: ± Promote a competitive economy ± Rules and regulations designed to promote a competitive economy by: ² Prohibiting actions that restrain or are likely to restrain competition ² Restricting the forms of market structures that are allowable Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 96 ° Sherman Act (1890) ± Section 1 ² Prohibits contracts, combinations, or conspiracies in restraint of trade ± Explicit agreement to restrict output or fix prices ± Implicit collusion through parallel conduct Limiting Market Power: The Antitrust Laws Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 97 ° 1983 ± Six companies and six executives indicted for price of copper tubing ° 1996 ± Archer Daniels Midland (ADM) pleaded guilty to price fixing for lysine -- three sentenced to prison in 1999 Limiting Market Power: The Antitrust Laws Examples of Illegal Combinations Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 98 ° 1999 ± Roche A.G., BASF A.G., Rhone-Poulenc and Takeda pleaded guilty to price fixing of vitamins -- fined more than $1 billion. Limiting Market Power: The Antitrust Laws Examples of Illegal Combinations Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 99 ° Sherman Act (1890) ± Section 2 ² Makes it illegal to monopolize or attempt to monopolize a market and prohibits conspiracies that result in monopolization. Limiting Market Power: The Antitrust Laws Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 100 ° Clayton Act (1914) 1) Makes it unlawful to require a buyer or lessor not to buy from a competitor 2) Prohibits predatory pricing Limiting Market Power: The Antitrust Laws Verspreiden niet toegestaan | Gedownload door Aamitabh Devi ([email protected]) lOMoARcPSD|1675695
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Chapter 10 Slide 101 ° Clayton Act (1914) 3) Prohibits mergers and acquisitions if they substantially lessen competition or tend to create a monopoly
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