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BUAD 5500, Topic 4

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Notes for Topic 4, BUAD 5500, Spring 2013

Notes for Topic 4, BUAD 5500, Spring 2013

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  • 1. Market Failure and the Government Spring 2013 Topic 4
  • 2. Perfect competitionMany actorsHomogenous productsNo barriers to entry or exitSymmetric informationNo external benefits or costs
  • 3. Why is this desirable?Consumer surplus
  • 4. Why is this desirable?Consumer surplusProducer surplus
  • 5. Why is this desirable?Consumer surplusProducer surplusMarket efficiency
  • 6. Violation 1: externalities Negative Consumption Production
  • 7. Violation 1: externalities Negative Positive Consumption Production
  • 8. Violation 1: externalities Negative Positive Potential solutions Fixed limits
  • 9. Violation 1: externalities Negative Positive Potential solutions Taxation Tax incidence
  • 10. Violation 1: externalities Negative Positive Potential solutions Ownership and tradable rights
  • 11. Violation 2: public goods Non-rival Non-excludable
  • 12. Violation 2: public goods Non-rival Non-excludable Solutions
  • 13. Violation 3: asymmetric information The market for lemons Adverse selection
  • 14. Violation 3: asymmetric information The market for lemons Adverse selection Possible solutions Secondary information markets Forced consumption
  • 15. Violation 4: imperfect competitionMonopoly powerPricing decisions MR and demand curve
  • 16. Violation 4: imperfect competitionMonopoly powerPricing decisionsMonopoly and PC outcomes compared Dead weight loss
  • 17. Violation 4: imperfect competitionTypes of imperfect competition Monopoly Oligopoly Monopolistic competition
  • 18. Violation 4: imperfect competitionTypes of imperfect competitionSources of imperfect competition Limited resource
  • 19. Violation 4: imperfect competitionTypes of imperfect competitionSources of imperfect competition Government policies Patents Copyright Licensing requirements
  • 20. Violation 4: imperfect competitionTypes of imperfect competitionSources of imperfect competition Natural monopolies
  • 21. Violation 4: imperfect competitionTypes of imperfect competitionSources of imperfect competition Non-homogenous goods
  • 22. Violation 4: imperfect competitionSolutions Anti-trust Approaches Consumer harm Strict size limits “Chicago School”
  • 23. Violation 4: imperfect competitionSolutions Anti-trust Market regulation

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