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1、 PMC.PMRColIusion:anagreementamongfirmsinamarketaboutquantitiestoproduceorpricestochargeCarteI:agroupoffirmsactinginunisonGametheory:thestudyofhowpeopIebehaveinstrategicsituationNashequiIibrium:reachedwhenthechoicesofaIIfirmsaresuchthatthereisnootherchoicethatmakesanyfirmbetteroff(iincreasesprofitso

2、rdecreaseIoss)Dominantstrategy:astrategythatisbestforapIayerinagameregardIessofthestrategieschosenbyotherpIayersTheoutputeffect:PMC,outputT,profitTThepriceeffect:QT,Pl,profitOutputeffectpriceeffect-increaseproductionFactorMarkets(10%-18%)DerivedfactordemandDemandforafactorofproductionMarginaIrevenue

3、productTheadditionunitofproductbringsadditionrevenueHiringdecisionsinthemarketsforIaborandcapitaIAcompetitive,profit-maximizingfirmhiresworkersuptothepointwheretheVMPL=wageMarketdistributionofincomeWage=VMPL=PricexMPLLabordemandshiftPT,VMPLf,labordemandTAdvanceintechnologyThesuppIyofotherfactorsLabo

4、rsuppIyshiftChangesintastesChangesinaIternativeopportunitiesimmigrationMarketFaiIureandtheRoIeofGovernment(12%-18%)ExternaIitiesPositiveexternaIity:sociaIbenefitprivatebenefitNegativeexternaIity:sociaIcostprivatecostCorrectivetax:ataxdesignedtoinduceprivatedecisionmakerstotakeaccountofthesociaIcosts

5、thatarisefromanegativeexternaIitySubsidiesPubIicgoodsPrivategoods:excIudabIe&rivalinconsumption(cIothing/congestedtoIIroads)PubIicgoods:notexcIudabIe¬rivalinconsumption(nationaIdefense/uncongestednontolIroads)Commonresources:notexcIudabIe&rivalinconsumption(environment/congestednontolIroads)CIubg

6、oods:excIudabIe¬rivalinconsumption(fireprotection/cabIeTV/uncongestedtoIIroads)PubIicpoIicytopromotecompetitionAntitrustIaw-ShermanAntitrustActRegulatethepricePublicownershipPreventcooperatingRestraintoftradeIncomedistributionVerticaIequity:theideathattaxpayerswithagreaterabiIitytopaytaxesshouIdp

7、ayIargeramountsHorizontaIequity:theideathattaxpayerswithsimiIarabiIitytopaytaxesshouIdpayIargeramountsLump-sumtax:ataxthatisthesameamountfoarveryperson(1.Causenodeadweightloss2.Notdistortincentive3.Minimaladministrativeburden)ProportionaItax:ataxforwhichhigh-incomeandIow-incometaxpayerspaythesamefractionofincomeRegressivetax:ataxforwhichhigh-incometaxpayerspayasmalIerfractionoftheirincomethandoIow-incometaxpayersProgressivetax:ataxfor

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