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Unformatted text preview: consumer surplus e. Now, assume 2 of Morks houses burned down. i. Would Mork buy 2 of Mindys houses? 1. This would shift the market supply to the left 2. This would raise the market price a. Mindy would buy 1 less house; Mork would only buy 1 house. 3. After the fire, Mark has less consumer surplus than he had before 4. So what about Mindy? a. She has a small producer surplus as a result of Morks misfortune b. Before, she didnt have any producer surplus d. In summary, a market equilibrium doesnt just mean that total amount supplied also happens to equal the total amount demanded (market demand) i. In addition, every individual in the market is also in equilibrium ii. Each consumer sets their marginal value equal to the price and every consumer is content to stay in this quantity because it maximizes their utility and maximizes the gains from trade...
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- Spring '08