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COLLUSION AND EFFICIENCY: Colluding oligopolistic firms generally produce less output and charge a higher price than would be the case for a perfectly competitive industry. In essence, colluding oligopolistic firms function just as if a market were monopolized. The price charged by the colluding firms is higher than the marginal cost of production. The equality between price and marginal cost is THE key indication that resources are allocated efficiently and that society's resources are being used to generate the highest possible level of satisfaction. Because the colluding firms control the market like a monopoly, the market demand curve is THE demand curve for the colluding firms's. With a negatively-sloped demand curve, price is greater than marginal revenue. And because a profit-maximizing firm equates marginal revenue with marginal cost, the price charged by the colluding firms when the maximize industry profit is greater than marginal cost.
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Lesson 12: Elasticity and Demand | Unit 2: The Continuum
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Page: 6 of 25
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Topic:
Five Alternatives
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NONPAYER EXCLUDABILITY Whether or not nonpayers can be excluded from consuming a good. In other words, can those who do not pay for a good be excluded from consuming the good. Nonpayer excludability is based on the ability to possess and transfer property rights or ownership of a good. For some goods, nonpayers can be easily excluded from consumption because property rights are well-defined and easily controlled. For other goods nonpayers cannot be easily excluded from consumption because property rights are not well-defined and cannot be easily controlled. When combined with consumption rivalry, the result is four alternative types of goods -- private, public, common-property, and near-public.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time at a flea market hoping to buy either an ink cartridge for your printer or a rechargeable battery for your camera. Be on the lookout for the happiest person in the room.
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This isn't me! What am I?
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The first paper notes printed in the United States were in denominations of 1 cent, 5 cents, 25 cents, and 50 cents.
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"Experience keeps a dear school, but fools will learn in no other. " -- Benjamin Franklin
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MRS
Marginal Rate of Substitution
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