✏️ Surplus Diagrams
Redoing the surplus diagram and the welfare analyses that Bruce covered in class is terrific practice. It is very helpful to memorize the shape of each of the main cases. I’ve reproduced each of the diagrams below with graphical illustrations and tables for the answers.
Perfect Competition
Section titled “Perfect Competition”✏️ First we should review the diagram for Perfect Competition. After filling in the following table, it won’t be hard to memorize the shapes of the CS, PS, and SS triangles. Remembering them will be very helpful! To help you, I’ve color-coded them.
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Price Ceiling
Section titled “Price Ceiling”✏️ Fill in the complete table for the welfare analysis of a price ceiling.
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Price Floor (Gov’t Doesn’t Buy)
Section titled “Price Floor (Gov’t Doesn’t Buy)”✏️ Fill in the complete table for the welfare analysis of a price floor when the government does not buy the surplus.
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Price Floor (Gov’t Buys)
Section titled “Price Floor (Gov’t Buys)”✏️ Fill in the complete table for the welfare analysis of a price floor when the government buys the surplus.
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