ECON101 Lecture Notes - Lecture 10: Deadweight Loss, Rent-Seeking, Economic Rent

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Corey Van De Waal

Document Summary

A social cost exists as deadweight loss represents loss to society. The social cost of monopoly can exceed the deadweight loss b/c of an activity called rent seeking: so(cid:272)ial (cid:272)ost of (cid:373)o(cid:374)opol(cid:455) = dead(cid:449)eight loss + (cid:373)o(cid:374)opol(cid:455)"s producer surplus. A single-price monopoly creates a deadweight loss that is inefficient. Any surplus consumer, producer surplus, or economic profit is called economic rent. Rent seeking: the pursuit of wealth by capturing economic rent: occurs when someone pursues a monopoly status. Such actions are a loss of society b/c they do not produce any output. No barrier to entry into rent seeking. Cost of rent seeking is a fixed cost that must be added to a (cid:373)o(cid:374)opol(cid:455)"s other (cid:272)osts if the (cid:373)o(cid:374)opol(cid:455) status is a(cid:272)hie(cid:448)ed. Price discrimination selling a good/service at a number of diff prices. Price discrimination tries to get buyers to pay a price for a good/service that is (cid:272)losest to the (cid:271)u(cid:455)ers" (cid:449)illi(cid:374)g(cid:374)ess to pa(cid:455) for the good/ser(cid:448)i(cid:272)e.