Exam 3 Notes
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This 11 page Bundle was uploaded by Alexandra Jernigan on Sunday November 29, 2015. The Bundle belongs to Econ 103 at George Mason University taught by Thomas Rustici in Summer 2015. Since its upload, it has received 72 views. For similar materials see INTRODUCTION TO MICROECONOMICS in Economcs at George Mason University.
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Date Created: 11/29/15
Economics of Information 1116 George Stigler information is a scarce economic good From last class Middlemen brokers retailers banks Advertising a lot of people assume that this information is free this is wrong an opportunity for choice that is not foreseen does not exist It informs you of your choices Telling people what is for sale if they don t know about it it doesn t exist Advertising ALWAYS lowers prices because it destroys informational monopoly Makes consumers aware of the options that they have of which they do not know Advertisers can not make you buy anything they do not have legal force like governments do There is no evidence to suggest that the more money you spend on advertising the better the advertising New Coke Example bad pepsi Political Private 1 Bait n switch False Advertising rewarding they don t go to jail for this 2 bundled transactions when you vote for a candidate based on the things that you want you also have to deal with the stuff you don t want 3 not every vote counts not a proportional representative government win 52 of vote take 100 of power Winner take all Only the winning votes count 4 recallreelection only every 24 6 years 5 rational ignorance 1 Bait n switch False Advertising punished they CAN go to jail for this 2 individual purchases we buy what we want and not what we don t want 3 Every penny counts towards profits business men need to please 100 of their customers to get 100 of the profit If they please 50 of their customers they only get 50 of the profit 4 Return policy easy if you are not pleased with a product then you can return it 5 Acquire information to avoid mistakes car facts consumer reviews 1118 Extra Credit Anthology Monopoly Competition 2 essays Information Economics 5 essays Rational Ignorance Congress votes on 1000s of bills each one is 100s of pages It makes no sense to read them because your vote doesn39t count by much Speculators forewarn us about future they are the most important in an economy they are the shock absorber of the economic system 1 acquire scare information about the future 2 stabilize price through time 3 shift the risk liability about uncertain future prices from producers to themselves futures contracts 4 allows others to pursue their comparative advantage The Hog Cycle farmers lose money on a 1000 bushes of wheat so the next year they don t grow wheat speculators keep them from making mistakes so they grow our food Speculators see graphs Economics of Income Distribution income should never be distributed 1 Entrepreneurs Coase theory firms want to maximize profits Profit or loss Accounting vs Economic Accounting normal profits permanent equilibrium Economic abnormal profits transitional disequillibrium 2 Workers labor in the factor of production Receive real wages monetary non monetary benefits value marginal productivity 3 Savers Real interest value of time Accounting profits and losses do not factor into account the opportunity cost of the owners capHaH Economic profits and losses DO factor in the opportunity cost of the the owners capital General equilibrium all the terms are equalized 10 each Surgeon general says that milk cures cancermilk gets a higher rate of return Economic equilibrium again as the other firms exit their professions and enter the milk industry A B Q apples milk shoes 10 1 0 1 0 exit 12 eXit 11 11 11 All economic decision making is on economic profits and losses not accounting profits andlossesH 1120 Entrepreneurs allocative dynamic of the market place when consumers demand frisbees more hula hoop makers and workers will allocate their resources to make frisbees instead profits are a reward for small businesses profits are a symbol of economic growth Workers value marginal productivity
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