What if there was worldwide free trade and movement of assets including people, one worldwide first language, and one worldwide currency, as is the situation among U.S. states? If goods and services, assets and people could freely move around the world as they do among the U.S. states and territories, and thereby no defense spending needed how much would world GDP grow? ChatGPT: This is a speculative but important question in economics and geopolitics. While no precise figure exists due to the complexity involved, we can estimate based on studies and models from free trade theory, global migration economics, and peace dividends. Key Components to Estimate World GDP Growth · Free Trade in Goods and Services Estimates from trade liberalization (e.g., WTO, World Bank) suggest removing all global trade barriers could raise world GDP by 1.5%–4%. · Free Movement of People Economists like Michael Clemens (Center for Global Development) estimate global open borders could double world GDP...
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Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 22 of 31 … The story of Readmuch Publishing Company teaches three lessons about price discrimination. -1- Price discrimination is a rational strategy for a profit-maximizing monopolist because it increases sales and profits. With price discrimination, a monopoly firm charges customers a price closer to their willingness to pay, selling more quantity of product than with a single price. … -2- Price discrimination requires the ability to separate customers by their willingness to pay. In the Readmuch example customers were separated by geography and online services. Monopolists commonly use differences such as income or age to distinguish among customers. … -3 - Price discrimination raises overall economic welfare. A deadweight loss arises when Readmuch charges a single $30 price. The 400,000 less-enthusiastic readers do ...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 21 of 31 … We have assumed the monopoly firm charges the same price to all customers. Actually, in many cases firms sell the same good to different customers for different prices. This happens even though the costs of producing for the two customers are the same. This practice is called price discrimination. … Price discrimination is not possible when a good is sold in a competitive market. Many firms are selling the same good at the same market price. No firm is willing to charge a lower price to any consumer because the firm can sell at the market price and would be losing money because price is lower than cost. If any firm tried to charge a higher price, consumers would buy from another firm. … For a firm to price discriminate, it must have some market power, an ability to influence prices. Imagine a company “Readmu...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 20 of 32 ... It may seem monopolies profiteer at the expense of the public. Whenever a consumer pays an extra dollar to a producer because of a high price · the consumer is worse off by a dollar · the producer is better off by a dollar More producer profits result in a larger economy and more and better paying jobs. Welfare in all markets is the sum of the welfare of both consumers and producers = consumer surplus (paying a lower price than the value) + producer surplus (profits). A monopoly firm's profit itself is not a problem for society. The problem is the deadweight loss shaded area shown in Figure 8. … There is often another cost incurred by monopolies: lobbying cost. Monopolies want to maintain their monopoly position. So, they typically use a portion of their monopoly profits to lobby lawmakers to help them keep...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 19 of 34 … Per Figure A, a town has only one monopoly firm supplying water. Marginal cost of pumping an additional (marginal) gallon of water is constant at $1 per gallon. The profit-maximizing firm chooses to charge a price $6 per gallon and supply 5 total gallons of water, where marginal revenue = marginal cost. Here total profit is maximized at $25 … Marginal cost of pumping water would be constant at $1 per gallon for other suppliers of water. Because of competition driving down the price all firms would eventually be forced to charge a price of $1 per gallon. End result would be a total of 10 gallons supplied and only a normal profit earned and no economic profit for any of the firms. … In a monopoly situation a benevolent social planner would · choose the competitive low price and high output quantity where the ma...
The Best Trade Agreement Is For Completely Free Trade, Same As Within The U.S. First, watch this short video: Free Trade vs Protectionism https://www.youtube.com/watch?v=7njIlZ2xYq0&t=92s … The U.S. should not focus on increasing U.S. exports but rather focus on increasing the total of exports plus imports. U.S. trade deficits (more imports than exports) are always balanced with the money coming back, largely through foreign investments in the U.S. which increases U.S. GDP and employment. Any lost current jobs caused by deficits are more than made up for by lower consumer prices and creation of new jobs including via foreign investment in new businesses in the U.S. … In 2020 the U.S.-Mexico-Canada-Agreement (USMCA) superseded the North American Free Trade Agreement (NAFTA), but the reasoning of the following discussion of NAFTA still applies. Mostly summarized from article “NAFTA 20 Years After - Neither Miracle nor Disaster”: Bill Clinton made NAFTA a cornerstone of his 199...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 18 of 34 Figure 8 - The Inefficiency of Monopoly In a monopoly situation · a price is charged above marginal cost · not all consumers who value the good at more than its cost can buy it · the monopoly quantity supplied is less than the efficient quantity The resulting deadweight loss is shown by the shaded triangle area between · the demand curve, which shows the value of the good to consumers · the marginal cost curve, which shows the costs of the monopoly producer … If a benevolent social planner was running a monopoly firm the firm could achieve the efficient outcome for the economy and society where total surplus is maximized, with no deadweight loss. This would be done by charging price M at the intersection of the demand and marginal cost curves. Price M would result in maximized total surplus and elimination of t...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 15 of 32 - Monopoly Section 17 of 34 … Figure 7 – The Efficient Level of Output A benevolent social planner who wanted to maximize total surplus in a market would choose the efficient quantity level of output, point E. This is where the demand curve and marginal cost curve intersect. At less than this efficient quantity, point A, the value of the good to the marginal buyer is more than the marginal cost of making the good. At more than this efficient quantity, point B, the value of the good to the marginal buyer is less than the marginal cost of making the good. … Consider what the monopoly firm would do if run by a benevolent social planner. The social planner cares about both · the profit earned by the firm's owners, with resulting growing economy, more jobs and higher worker pay · the benefits received by the firm's consumers, lower prices ...