ECO 201 Lecture Notes - Lecture 13: Market Power, Competitive Equilibrium
Document Summary
Competitive equilibrium is efficient only if no positive or negative benefits. The entry of uber decreases the demand for taxi cabs which decreases the price of taxi rides makes profits negative and decreases the price of the medallion. Companies erect barriers to entry to limit competition and maintain prices. Short run vs. long run effect of increase in variable input price. In long run firms exit until profits = zero. Binding quotas stop us from obtaining as much as we actually want. If there are economies of scale in production as production increases then long run average total cost will decreases. In an increasing cost industry as firms exit costs will go down. In a decreasing cost industry as firms exit cost will go up. Patents are necessary because they are incentives for people to invent new things such as better pharmaceuticals. Monopolies are always bad for the consumer and the economy.
