Professional Documents
Culture Documents
2. Combatexternalities.
3. Providepublic goods.
4. Controlnoncompetitive behavior.
5. Change income
distribution.
1. Information
Externalities
exist when the activitiesof one or more
agents affectthe preferencesor technologiesof other
agents. There are negativeand positiveexternalities,
as well as production and consumption externalities.
• Consumptionexternalitieslead to charity
and raise issues of equity.
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3. Public Goods
4. Noncompetitive Behavior
5. Distribution
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Welfare Analysis:
The Inefficiency of Monopoly (One Seller)
Figure 0.2
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Total Surplus
loss for society under monopoly = area DEC.
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Welfare Analysis:
The Inefficiency of Monopsony (One Buyer)
Figure 0.3
A Monopsonist is a noncompetitive
buyer. The Monopsonist
reduces purchases tos, Q
where marginal outlay (MO) equals
marginal benefit (MB).
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Welfare Analysis:
The Inefficiency of "The Middleman"
Figure 0.4
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