ECON 101 2Midtermreview

A common resource is owned by no one but can be used

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: is called market supply. Figure 5.3 shows the connection between individual supply and market supply. Producer Surplus Producer surplus is the price received for a good minus the minimum- supply price (marginal cost), summed over the quantity sold. It is measured by the area below the market price and above the supply curve, summed over the quantity sold. The blue areas show his producer surplus. The red areas show the cost of producing the pizzas sold. In equilibrium, the quantity demanded equals the quantity supplied. At the equilibrium quantity, marginal benefit equals marginal cost, so the quantity is the efficient quantity. When the efficient quantity is produced, total surplus (the sum of consumer surplus and producer surplus) is maximized. The...
View Full Document

This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.

Ask a homework question - tutors are online