1. What might be lost by doing partial equilibrium analysis instead of general e

Question

1. What might be lost by doing partial equilibrium analysis instead of general

equilibrium analysis?

2.What is the basic argument for the efficiency of free markets?

3. What are some ways in which markets may fail to be efficient?

4. How is marginal revenue calculated for a monopolist and why is the marginal

5. revenue curve below the demand curve?

6. What are network externalities?

7.What is the source of inefficiency from monopolies?

8.What is rent seeking behavior?

9.What is price discrimination? Perfect price discrimination?

10.What is necessary for price discrimination to work?

11.How is price discrimination related to elasticities of demand?

12.What are the Sherman Act and Clayton Act?

13.How do these two acts affect the regulation of firms?

Explanation / Answer

1) Both equilibrium are meant for microeconomics analysis. But it can be said that Partial equilibrium is a subset of general equilibrium. Partial equilibrium also known as Marshellian partial equilibrium, is for analyzing specific markets, like an individual phenomenon. Whereas general equilibrium also known as Walrasian general equilibrium, is used to explain the functioning of economic markets as a whole.

2)

The basic arguments for efficiency in free market is :-

3)

Ways in which markets might fail to be efficient are: -

4) To find MR find Total Revenue (TR) = Price * Quantity and then differenciate TR to get MR.

Marginal Revenue (MR) is the benefit to the monopolist of selling one more additional unit. Because the monopolist must lower the price on all units in order to sell additional units, marginal revenue is less than price. Now the price equation is same as demand equation so we can say that MR is below Demand curve.

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