Lecture notes week 9

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University of Toronto Scarborough
Economics for Management Studies
Gordon Cleveland

ECMA04H Week 9 Efficiency in competitive and monopolistic markets. Regulating natural monopoly. Objectives this week: E Review Consumer Surplus and Producer Surplus E Define Gain to Society (GTS) as a summary measure of net economic benefits E Discuss allocative efficiency in competitive and monopolistic markets E Discuss ways to regulate natural monopolies, including marginal cost pricing and average cost pricing First, complete our discussion of monopoly What about the long run? Same as short run Is the monopolist efficient? Several perspectives: Does the monopolist minimize costs? Yes, should be on the AC curve Does the monopolist produce atMES? Nothing that encourages monopolist to produce at q but will choose to produce wherever MC = MR, which could lead toor not MES MES Is marginal benefitqual to marginal cost at the monopolists equilibrium output? Marginal benefit is given by the demand curve Does the monopolists output maximize the Gain to Society? How do we measure Gain to Society (GTS)? www.notesolution.com
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