Competition III

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Session Overview


Models are easy to construct, but they may not always exactly match reality. While we assume that firms maximize profits, this may not always be true, and in this lecture we start to learn why. We also start to think about how we can measure the welfare that consumers gain from participating in a market.

Stocks and stock options are commonly used to overcome the agency problem. Image courtesy of Lance Ball on Flickr.

Keywords: Agency problem; corporations; stock options; normative economics; welfare economics; consumer surplus.

Session Activities


Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:

  • [Perloff] Chapter 8, "Competitive Firms and Markets." (optional)

Lecture Videos


Check Yourself

Concept Quiz

This concept quiz covers key vocabulary terms and also tests your intuitive understanding of the material covered in this session. Complete this quiz before moving on to the next session to make sure you understand the concepts required to solve the mathematical and graphical problems that are the basis of this course.


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