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Economics 325 Test One 1) Point C on the interpret is the social optimum level of output. The sector under the pauperism bending for increasing from point E units of cocoa berry halt chalk skim off to point F is the essential 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 ripening from point F to point G we attain a net vent of CBH. This is due to the marginal take in ( want curve) decrease as the units of deep brown chip applesauce slam dance 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 be is what the society is willing to give up in parade to benefit from something else. interpret 1 shows the add together and demand for chocolat e 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 sound judgment we are pitiable from left to full). Graph 2 shows the supply and demand for vanilla extract extract scratch 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 rank that the total cost for increasing chocolate 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 that w e COULD have gained if we had more vanilla i! ce 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 remainder 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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