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Author Question: In perfect competition in the long-run equilibrium, can consumer surplus or producer surplus be ... (Read 202 times)

schs14

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In perfect competition in the long-run equilibrium, can consumer surplus or producer surplus be increased? Explain your answer.
 
  What will be an ideal response?

Question 2

Refer to Table 2-18. What is Mickey's opportunity cost of making an umbrella?
 
  A) 1/5 of a hat B) 5 hats C) 10 hats D) 50 hats



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zogaridan

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Answer to Question 1

Once at the competitive equilibrium quantity, which is the same as the efficient quantity, the sum of consumer surplus plus producer surplus is as large as possible. If the price is lowered, consumer surplus increases but only at the expense of a larger decrease in producer surplus. And the lower price is not the long-run equilibrium price.
If the price is raised, producer surplus increases but only at the expense of a larger decrease in consumer surplus. And the higher price is not the long-run equilibrium price.

Answer to Question 2

C





 

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