Surplus & Shortage - in perfect competition no...

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The term surplus is used in economics for several related quantities. The consumer surplus (sometimes named consumer's surplus or consumers' surplus ) is the amount that consumers benefit by being able to purchase a product for a price that is less than the most that they would be willing to pay. The producer surplus is the amount that producers benefit by selling at a market price mechanism that is higher than the least that they would be willing to sell for. Note that producer surplus generally flows through to the owners of the factors of production
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Unformatted text preview: : in perfect competition , no producer surplus accrues to the individual firm. This is the same as saying that economic profit is driven to zero. Real-world businesses generally own or control some of their inputs, meaning that they receive the producer's surplus due to them: this is known as normal profit , and is a component of the firm's opportunity costs . If the markets for factors are perfectly competitive as well, producer surplus ultimately ends up as economic rent to the owners of scarce inputs such as land . [1]...
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This note was uploaded on 05/25/2011 for the course ECON ECON 201 taught by Professor Amsler during the Spring '11 term at Michigan State University.

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