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What are the important functions to maximize total surplus?
The market equilibrium maximizes total surplus since the market performs four significant functions are as follows:
1. This allocates consumption of the good to the potential buyers who value this most.
2. This allocates sales to the potential sellers who most value the right to sell the good.
3. This ensures about every consumer who creates a purchase values the good more than every seller who makes a sale.
4. This ensures that each potential buyer who doesn’t build a purchase values the good less than each potential seller who doesn’t make a sale.
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Why firm charges different prices to different consumer? Every firm needs to maximize its profit. When goods are sold to different customers, each customer negotiate price of
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For each of following production functions, comment on the ability to substitute capital for labor. Note that Q, K, and L denote output, capital, and labor respectively. A: B
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