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What Must Be True About the Relative Magnitudes of Consumer

Question 42

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What must be true about the relative magnitudes of consumer and producer surplus if (i) market prices tend to converge to the equilibrium price from above or stay tend to stay above the equilibrium; (ii) market prices tend to converge to the equilibrium price from below or tend to stay below the equilibrium and (iii) market prices converge to the equilibrium smoothly. Draw a free-hand diagram showing a market with the appropriate demand and supply curves for each of these three cases. Just to make sure, you answer should include three diagrams, one for each question asked above.

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Answered by Quizplus AI

(i) If market prices tend to converge to...

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