Micro 17

2. Microeconomics
Lecture 17
Exam 4 Review

3. Questions?

4. Regulation
Controlling Monopolies
Externalities

5. Q
P
Perfect Competition
Marginal Cost
MC Average Cost
ATC
Total Cost
$
Quantity
Profit
Demand=MR
Total Revenue

6. Marginal Cost
MC
Q
P
Marginal Revenue MR
Monopoly
Average Cost
ATC
Cost
$
Q
Profit
Demand
Deadweight
Loss
Consumer
Surplus

7. Marginal Cost
MC
Q
P
Marginal Revenue MR
Monopoly
Average Cost
ATC
Cost
$
Q
Profit
Demand
Deadweight
Loss
Consumer
Surplus
Still earns profits
Increase Consumer Surplus
Reduce Deadweight Loss

8. Regulation
Separate Production
from
Delivery

9. Caveat Emptor
Let the buyer beware

10. agent
a person acting for
another person

11. principal
a person for whom
another person is
acting for

12. moral hazard
to act differently
because someone
else will pay the
costs

13. asymmetric
information
unequal information

14. Who knows more about the car?

15. Asymmetric Information
Not Equal
Symmetric Asymmetric
Buyer Seller

16. adverse selection
taking advantage of
someone’s lack of
knowledge

17. adverse selection
making a bad choice
due to lack of
information

18. moral hazard
changing behavior after
the transaction to
make the other party
worse off

19. moral hazard
temptation to act
immorally