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Essentials of Economics 7th Edition by Gregory Mankiw
Edition 7ISBN: 978-1285165950Essentials of Economics 7th Edition by Gregory Mankiw
Edition 7ISBN: 978-1285165950 Exercise 9
A small town is served by many competing supermarkets, which have constant marginal cost.
a. Using a diagram of the market for groceries, show the consumer surplus, producer sur-plus, and total surplus.
b. Now suppose that the independent super-markets combine into one chain. Using a new diagram, show the new consumer surplus, producer surplus, and total surplus. Relative to the competitive market, what is the transfer from consumers to producers? What is the deadweight loss?
a. Using a diagram of the market for groceries, show the consumer surplus, producer sur-plus, and total surplus.
b. Now suppose that the independent super-markets combine into one chain. Using a new diagram, show the new consumer surplus, producer surplus, and total surplus. Relative to the competitive market, what is the transfer from consumers to producers? What is the deadweight loss?
Explanation
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(a) Figure 1 shows the competitive marke...
Essentials of Economics 7th Edition by Gregory Mankiw
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