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Unformatted text preview: AVC P < Consumer surplus (CS): The benefit consumers receive when they purchase units for less than they are willing to pay for them Calculating CS: )) ( ) (( ) ( 2 1 price m equilibriu units zero demand consumers which at price quantity m equilibriu CS = In a perfectly competitive market, firms choose their quantity such that MC P = Expected value of a bet with two outcomes X and Y = ($ value of X)(Probability of X) + ($ value of Y)(Probability of Y) Note: (probability of X) + (probability of Y) = 1 Expected utility of a bet with two outcomes X and Y = (utility of X)(probability of X) + (utility of Y)(probability of Y)...
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This note was uploaded on 07/17/2008 for the course ECON 501.01 taught by Professor Reagan during the Fall '07 term at Ohio State.
 Fall '07
 REAGAN
 Utility

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