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Lecture 1

ECON 100B Lecture Notes - Lecture 1: Form 10-Q, Reservation Price, Economic Equilibrium

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Econ 100B Lecture 1 - April 10, 2018
Weekly homework will be on MyEconlab
No use of cell phone in class
For any course related questions, please email and ask your TA first
Firms with market power pricing and other strategies (Chapter 11)
Maret forms: perfect competition
Main characteristics
Many firms in the market: action of individuals seller does not affect market
equilibrium. Firms sell identical products.
Individual seller/firm do not have control on prices. They are price taker. Demand
curve for individual firms is horizontal.
Combined effect on may boba stall’s decisions will affect market price. Market
demand curve is downward sloping.
Free entry and exit
In the long run, the profit is zero
The intersection of the industry supply curve and the market demand curves gives the
market equilibrium price that individual firms that as given
Consumer and producer surplus in a perfectly competitive market
Consumer surplus is maximized under perfect competition.
Area below the demand curve and above the market price
Producers earn zero economic profit but usually earn positive producer surplus.
Area below the market price and above the supply curve
Maret forms: Monopoly
Main characteristics
Single firm selling unique product to the market
High barriers to entry
Firm has control over market price aka market power. We used the Lerner’s
index to calculate the market power of the firm
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