1. Prices Unit Review

2. Markets
Perfectly Competitive: allocative and productive efficiency; P=D=MR=MC=min ATC
Monopolistic: less efficient
Oligopoly: even less (perhaps least)
Monopoly: natural (economies of scale) vs. gov’t created (patents, etc.); regulation (self- or gov’t) greater efficiency (but diseconomies of scale)
Monopsony
Predatory pricing and limit pricing

3. Against the Law Price floors: min. wage Price ceilings: rent control
Inefficiency + Black markets
Information Asymmetry
Lemons, moral hazard, adverse selection
Government Laws:
Wagner Act, Taft-Hartley
Sherman Anti-Trust Act: bans monopoly activities that interfere with interstate commerce

4. Labor Consumption vs. Leisure Now vs. later Reservation wage
Efficiency wages: why does In ‘N Out pay above minimum wage?

5. Unions Labor monopoly balances monopsony power of bosses
Undermined by changing laws, success, and transition to globalized service economy (greater foreign competition + professionals less likely to unionize)

6. Wal-Mart
Good: 1) lower prices higher real wages; 2) relentless focus consumer demand greater allocative efficiency (Telxon); 3) outsourcing or threat of outsourcing greater productive efficiency

7. Bad: 1) lower wages + not really lower prices (“opening price point” scam) lower real wages; 2) outsourcing fewer American jobs; 3) example of no benefits + breaking unions lower standard of living (compare GM); 4) denying health benefits higher cost of health care for all (moral hazard myth)