Unformatted text preview: a competitive market ------ efficiency is not the same as equity A competitive equilibrium may not be efficientin the presence of externalities Deadweight loss is the cost of an inefficient outcome in a marketplace. It can be caused when too much, past the competitive equilibrium is produced. It can also be caused when not enough is produced. Goods not traded in the market Optimal behavior : MB = MC MB > or equal to MC do more MB < MC do less Consumer surplus – marginal benefit minus price for all units Change in consumer surplus with price increase Producer surplus – price minus marginal cost for all units Government creates markets...
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- Fall '08
- Economics, competitive equilibrium, lower cost MC