Principles of Economics- Mankiw (5th) 142

Principles of Economics- Mankiw (5th) 142 - 148 PA R T T H...

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148 PART THREE SUPPLY AND DEMAND II: MARKETS AND WELFARE COST AND THE WILLINGNESS TO SELL Imagine now that you are a homeowner, and you need to get your house painted. You turn to four sellers of painting services: Mary, Frida, Georgia, and Grandma. Each painter is willing to do the work for you if the price is right. You decide to take bids from the four painters and auction off the job to the painter who will do the work for the lowest price. Each painter is willing to take the job if the price she would receive exceeds her cost of doing the work. Here the term cost should be interpreted as the painters’ opportunity cost: It includes the painters’ out-of-pocket expenses (for paint, brushes, and so on) as well as the value that the painters place on their own time. Table 7-3 shows each painter’s cost. Because a painter’s cost is the lowest price she would accept for her work, cost is a measure of her willingness to sell her services. Each painter would be eager to sell her services at a price greater than her
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