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ECON 1050 (117)

Efficiency, Public Goods, Theory of Firm, and Monopolies

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ECON 1050
Bryce Mc Bride

Lecture November 21November 21 2013232 PMHomework Chapter 15 PA 1 4 7 and read Chapter 16If welfare is maximized the market outcome is allocatively efficientAllocative efficiency everyone who is able to pay for the costs of the good is able to get itProduction continues so long as PriceMarginal Cost until PMCProductive Efficiency goods are produced at the lowest average costTaxes and subsidies have important effects on efficiency in particular allocative efficiencyMarket failure occurs where there is a welfare loss sum of customer and producer surplus is not maximizedWere allocative efficiency is not observed due to externalities of production or consumption monopoly power or asymmetric informationPublic goods nonrivalrousNonexcludableFace the free rider problemVery unlikely that a private individual would provide themA special case of market failure more extremeTheory of the Firm looks at the behaviour of firms in different competitive environmentsCompetitive firms face a mar
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