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Unformatted text preview: trading in the market. It is the sum of the producer and the consumer surplus o TS=CS+PS Slide 22 o Both the consumer and producers are better off because there is a market in this good (Gains from trade) o Free markets properly allocate goods to buyers and sales to sellers o Total surplus is maximized Slide 23 o Market Failure: Occurs when a market fails to be efficient Slide24 o A tax causes a deadweight loss to society, because of the good is produced and consumed than in the absence of the tax. As a result, some mutually beneficial trades between producers and consumers do not take place....
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