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Unformatted text preview: STAY IN THE FARMING BUSINESS? 9-8 DOES ANDY OWNING LAND MAKE A DIFFERENCE? 9-9 THE INVISIBLE HAND THEORY
! Two 1. functions of price: Rationing function
! 2. To distribute the scarce good to those consumers who value them
most highly Allocative function
! To direct resources away from overcrowded markets and towards
markets that are underserved
9-10 INVISIBLE HAND THEORY
! The actions of self-interested buyers and sellers, all acting independently, will often result in the socially
optimal allocation of resources 9-11 HOW FIRMS RESPOND TO PROFITS AND
LOSSES Figure 9.2 Economic profit in the short run in the apple market
At an equilibrium price of $2 per kilogram (a), the typical orchard earns an economic pr...
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- Three '08