Producer_surplus_Slides_Portrait___Notes_630_430

Producer_surplus_Slides_Portrait___Notes_630_430 - Figure...

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Figure 1: Producer Surplus: area above short run supply curve = areas a + b q MC Q* O q MC Q* ATC AVC O Figure 2: Producer Surplus: TR – TVC = areas f + g P p a b ATC AVC p P g f h ATC AVC π = area a FC = area b wtp to stay in business = areas a + b supply curve starts here
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Figure 4: Measuring Welfare of a Household Laborer U U' m, C v 1 v 1 +w 1 T a b T 0 v 1 +w 2 T w 2 w 1 a b c d H b H a money income constraint; slope = w/p Leisure Work demand for leisure
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Figure 4 Total value of leisure = areas a , c & d Income = v + areas b & d Cost of leisure foregone = area c & d Area d is cost of working (leisure foregone) Area c loss of wages or opportunity cost of leisure consumption (wages otherwise could be earned and consumed - leisure foregone) Area b is surplus of income over opportunity cost of leisure Area a is consumer surplus of leisure Not shown is the consumer surplus of consumption (from demand curve)
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m, C v a b T 0 w w 2 a b c VMP H Leisure Work TVP
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Producer_surplus_Slides_Portrait___Notes_630_430 - Figure...

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