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Unformatted text preview: MSC; if the marginal benefit of an action the marginal cost of the action ˃ ˂ do not do it = MSB MSC ˂ Allocative Efficiency : all MSB MSC; none MSB MSC; MSB = MSC ˃ ˂ Adam Smith (1776) “People looking out for only their self interests are nonetheless lead, as if by an invisible hand, to advance society’s interest. Consumer Surplus = difference b/w max P consumer is willing to pay (value=MSB) & P over Q ; (MSB – P ) ÷ Q Producer Surplus = difference b/w P & minimum P willing to produce (value=MSC) over Q ; ( P – MSC) ÷ Q...
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This note was uploaded on 01/16/2012 for the course ECO 2023 taught by Professor Rush during the Fall '08 term at University of Florida.
- Fall '08