BSB113 Lecture Notes - Lecture 7: Economic Surplus, Marginal Utility, Marginal Cost
Document Summary
The economically efficient level of output, where marginal benefit equals marginal cost. The greatest amount of economic surplus, or total net benefit to society, from the production of a good or service. It as the role of government to correct for areas of market failure. The legal system and the rule of law. To enforce the law of the country, particularly with respect to protecting private property and enforcing contracts. Contracts will not be entered into unless they can be enforced. Profit maximisation leads to higher prices and lower output than is economically efficient. Economies of scale are so large that one firm can supply the entire market at a lower average cost than two or more firms (distribution networks, electricity markets) Regulate against anti-competitive behaviour which increase prices. Sometimes the removal of regulations may be what is required to increase efficiency.
