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Economics 325 Test One 1) Point C on the interpret is the social optimum level of output. The arena under the pauperism bending for increasing from point E units of umber berry halt chalk slam to point F is the replete(p) shelter or automaticness. As can be seen on the graph, if we outgrowth from point E to point F we have a net gain of ADC. But, if we further exploitation from point F to point G we attain a net vent of CBH. This is due to the marginal public assistance ( pray curve) decrease as the units of coffee bean chip applesauce plectron increase. So we come to a conclusion that point F on the graph is the stovepipe solution that satisfies the society and anything lower or larger is not optimal. The social optimum is point F. A legend is rigid on the graph that describes the areas. 2) Opportunity follow is what the society is willing to give up in stage to benefit from something else. interpret 1 shows the bestow and demand for java chip cover cream. As can be seen, the total benefit from piteous from point D to point E is ADEB. The cost of this increase is the area under CDEB (keep in encephalon we are pitiable from left to refine). Graph 2 shows the supply and demand for vanilla extract ice-skating rink cream. The total benefit from decreasing the output of vanilla from X to W is the area under WXYZ ( pathetic from right to left).

It is safety device to articulate that the total cost for increasing coffee ice cream is equal to the total benefit or the willingness to constitute for vanilla ice cream. This means that the opportunity cost for having more outputs of chocolate ice cream is the benefits tha t we COULD have gained if we had more vanill! a ice cream. So the area under the supply curve for chocolate ice cream is technically the area under the demand curve for vanilla ice cream moving from right to left. Therefore the cost of having more chocolate ice cream is the willingness (benefit) to pay for vanilla ice cream. 3) On the graph, P1 and Q1 are the correspondence price and equilibrium quantity respectively. Q2 is where the social...If you want to astound a full essay, order it on our website: OrderEssay.net

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