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X-INEFFICIENCY: Cost that is higher than it needs to be because a firm is operating inefficiently. This is most often seen for firms that have a great deal of market control, especially monopoly. The lack of competition allows a business to pad it's expenses, hire unneeded employees (like relatives), goof off instead of working, and all sorts of other things that lessen production and increase cost. The business is not penalized for these actions, because market control allows the company to extract whatever price is needed to cover cost.
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Lesson 23: Factor Market Equilibrium | Unit 5: Bilateral Monopoly
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Page: 23 of 24
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- The four curves in this diagram illustrates the boundaries of this negotiation.
- However, we don't have just a monopsony or just a monopoly, we have a bilateral monopoly.
- The ultimate price depends on which side is the better negotiator.
- One of the more intriguing implications of this analysis is for efficiency:
- While neither monopsony nor monopoly are particular efficient, the price negotiated by a bilateral monopoly is bound to be closer to the perfect competition price than the other two separately.
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POLITICAL GAME The political system can be thought of as a game, a contest between two groups of players. Rulers are the ones who set the rules. Rulees are the ones who must abide by the rules. The political game, of course, has serious consequences, with winners and losers. The distribution, either concentrated or dispersed, of these consequences can have a profound effect on the game. The study of public choice provides insight into the economic efficiency with which the political game is played.
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RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time watching infomercials wanting to buy either a T-shirt commemorating yesterday or a pair of handcrafted oven mitts. Be on the lookout for small children selling products door-to-door.
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This isn't me! What am I?
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A thousand years before metal coins were developed, clay tablet "checks" were used as money by the Babylonians.
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"Chance favors only the prepared mind." -- Louis Pasteur, biologist
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CJE
Canadian Journal of Economics
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