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Lecture 5 September - Today’s agenda • Consumer surplus • Producer surplus • A first look at the case for market allocation • Fundamental

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Unformatted text preview: Today’s agenda • Consumer surplus • Producer surplus • A first look at the case for market allocation • Fundamental theorem of welfare economics • Preview: Sources of market failure Consumer surplus Demand curve: schedule of maximum willingness to pay for consumers Q $/Q S D Consumer surplus Q $/Q S D Consumer surplus Q $/Q S D Consumer surplus Q $/Q S D Consumer surplus Total expenditure Consumer surplus Q $/Q S Supply curve: schedule of minimum necessary compensation for producers Q $/Q S Supply curve: schedule of incremental costs of producers Supply curve: schedule of incremental costs of producers Revenue on first unit exceeds marginal cost Revenue on first unit exceeds marginal cost Producer surplus on first unit Revenue on all units exceeds marginal cost Revenue on all units exceeds marginal cost (except the last) Producer surplus Q $/Q S P Producer surplus: (P-MC) summed over all units supplied If an early freeze in California ruins the lemon crop, consumer surplus in the market for lemons will A. increase....
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This note was uploaded on 11/10/2011 for the course ECON 220:102 taught by Professor Rubin during the Fall '11 term at Rutgers.

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Lecture 5 September - Today’s agenda • Consumer surplus • Producer surplus • A first look at the case for market allocation • Fundamental

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