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This topic weaves through individual choices, how those choices play out in groups (social interactions), and how we judge the overall results (welfare).

Market power refers to a firm's ability to charge a price higher than its marginal cost of production. In a perfectly competitive market, firms are price-takers, and price equals marginal cost. However, when market power exists, firms face a downward-sloping demand curve, allowing them to choose a price-quantity combination that maximizes their profits.

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Normally, competitive markets lead to efficient outcomes, meaning resources are allocated optimally (Pareto efficient). However, sometimes markets fail, leading to outcomes that aren't Pareto efficient. This means there's a way to make someone better off without making anyone else worse off.

The core idea here is comparative advantage. You might be good at producing everything (absolute advantage), but you still benefit from specializing in what you're relatively best at and trading for the rest.

• Absolute Advantage: A country can produce a good using fewer inputs (e.g., labor hours) than another country.
• Comparative Advantage: A country has a lower opportunity cost of producing a good than another country. This means to produce one more unit of that good, it gives up less of another good compared to the other country.

This topic draws heavily from the CORE Microeconomics units, especially emphasizing Units 7 and 10 which cover labor markets, firms, and economic fluctuations.

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