ECON 104 Lecture Notes - Lecture 9: Market Failure, Rogers Arena, Unemployment
22 Mar 2016
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Continue from last week - chapter 7 macroeconomic policies. Frictional unemployment (growth-> institutional->unemployment offices): in between jobs (but within same occupation) and looking for their first job. Structural unemployment (growth-> institutional->unemployment offices): between occupations: structure of economy changes over time, some industries grow and some industries shrink, ford starts making cars (retraining) Economy is at full employment (no cyclical unemployment) if ur = natural ur. Market power: an individual firm can influence market price. Mc=p=mr=increase $ if you sell one more unit (price takers) Econ 104: costly info about prices, travel is costly local monopoly, horizontal differentiation = products are slightly different, natural monopoly. There"s enough demand in the market for one firm to market profit, but not enough for 2 firms to make profits: legal monopoly. P doesn"t equal mr as mr < p. Transfer of surplus from consumers to the firm. 1950"s chicago ie: 1,000 firms, each can produce at /unit: 1 firm can produce at . 98/unit.
