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Week 4 Discussion Economics.docx

Week 4 Discussion Economics.docx - Week 4 Discussion...

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Week 4 Discussion Economics 1. What is efficiency, and why is it so important? Efficiency is defined as “the property of a resource allocation of maximizing the total surplus received by all members of society” (Mankiw, p. 143). Efficiency is important because if any change is made to assist a product it could hurt another product. According to Mankiw, if an allocation is not efficient, then some of the potential gains from trade among buyers and sellers are not being realized (p. 143). Efficiency is good when a good is produced by sellers at a low cost. Producers and sellers are trying to be efficient as possible. They want to make sure a good is produced at the lowest cost and great quality so that a great output can come out for the buyers and sellers. 2. What happens to consumer and producer surplus when the sale of a good is taxed? How does the change in consumer and producer surplus compare to the tax revenue?
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