Class+11+Partial+Equilbrium+I+_Allocations_+after-1

Class+11+Partial+Equilbrium+I+_Allocations_+after-1 -...

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P ti l E ilib i I Partial Equilibrium I: Allocations and Feasibility
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Results ! Average/ Median: 199.6/200 points out of 300 ! Letter “Grades” are indicative only. Final curve is likely to be slightly more favorable ( extra credit ) ! Post Exam Review Session: Tuesday, Feb. 9, 7-9pm in CHEM 1210 ! Talk to me or your GSI about strategies for studying / improving (Send me or your GSI an email to make an individual appointment). ! I h dditi l OH t d M 5 15 6 00 L h I have additional OH today, M 5:15-6:00pm, Lorch 339. (Regular: W, 5:15-6:00pm.) Exam: we’re proud of you…
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Model of Competitive Markets Markets determine Allocations: Who gets what? E l All i Wh i d’ ll i ? I h i i ll i d’? Evaluate Allocations: What is a ‘good’ allocation? Is the competitive allocation ‘good’? Complications: Externalities, Monopoly, Public Good Provision Syllabus
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One Firm in the Market: Producer Surplus and Profits
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! " ! " x # Fundamental Theorem of Calculus The general form: 0 0 ' f x f f dx $ % Total costs are equal to fixed costs plus the integral over marginal costs: ! " ! " ! " 0 0 ' q c q c c q dq $ % # V i bl C t Fi d C t The integral over marginal costs is equal to the variable cost: Variable Costs Fixed Costs ! " ! " ! " 0 ( ) 0 ' q VC q c q c c q dq $ & $ # Variable Costs
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Example I: Price ! " ! " ! " 1 1 0 0 1 ' 2 1 VC c q dq q dq $ $ $ # # ! " 2 1 c q q $ % Total Costs: Variable Costs: 3 4 ! " ' 2 c q q $ 1 2 0 1 2 0 q Variable Costs: Area under the marginal cost curve Variable Costs
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3 4 Price ! " 2 S P q q $ Producer Surplus = Revenue minus Variable Costs 1 2 At a price p , supply is ! " S Q Example I: 0 1 2 0 q Producer Surplus at a price p ! " 2 ! " ! " ! " ! " 0 PS p pq c q c $ & & q p $ Total Costs: What is the producer surplus at p = 2? Supply at p = 2 is q = 1 1 c q q $ % Supply at p = 2 is q Revenue: p * q = 1*2 = 2 Variable costs: VC (1) = 1 The producer surplus at a price p = 2 is 1.
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