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Unformatted text preview: 1. Firms sell the same standardized product 2. Buyers are willing to switch from one supplier to another if price changes 3. Markets have many buyers and sellers, each of which buys or sells only a small part of the total that is exchanged 4. Productive resources are mobile 1. If a seller sees a profit opportunity, it can easily begin to supply in that market III. Lower Cost of Production --> Increase in supply 1. Supply shifts right/down 2. For any given price, firms supply more. 3. For any give quantity, marginal cost of production fell IV. Producer Surplus 1. The total gains that suppliers receives for participating in a market 2. The amount that price exceeds the seller's reservation price 1. The minimum price a seller would take for its product 3. Shaded area Above supply curve, Below market price 4. Producer surplus does NOT equal profit, since it includes soe benefits that flow to the owner's of productive resources 1. PS > Profits...
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