note2 - ch5

note2 - ch5 - Econ 251 Fall 2009 Handout 8 09/17/09 Chapter...

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Econ 251 Fall 2009 Handout 8 09/17/09 1 Chapter 5 (cont’d.) – Efficiency and Equity Properties of Market Equilibrium : 1. 2. 3. 4. Over and Under Production _______________ can occur because: _______________ is being produced => _________________ _______________ is being produced => _________________ The loss coming from inefficiency is called ______________________________. Def. Deadweight Loss = the ________________ in _______________________ that results from an _____ _______________ level of production. Example : The Market Demand and Supply of ice-cream are represented as follows: D: S: Suppose that there is _________________________ of ice-cream and that the quantity produced is 2 units of ice-cream. What is the deadweight loss at Q=2?
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Handout 8 09/17/09 2 A deadweight loss of _______ implies that the economy is giving up value that would have been obtained from an increased production. Decomposing the deadweight loss: b component coming from the __________________________ b component coming from the __________________________ DWL = What is the lost consumer surplus coming from underproduction? Lost CS =
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note2 - ch5 - Econ 251 Fall 2009 Handout 8 09/17/09 Chapter...

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