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ECON 101 2Midtermreview

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

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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...
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