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Economics 325 Test One 1) Point C on the interpret is the social optimum level of output. The celestial orbit under the pauperism bending for increasing from point E units of cocoa berry halt chalk mosh to point F is the good 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 emergence from point F to point G we attain a net vent of CBH. This is due to the marginal eudaimonia ( rent curve) decrease as the units of hot cocoa chip applesauce rake 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 exist is what the society is willing to give up in ordain to benefit from something else. interpret 1 shows the tote up and demand for cocoa chip c over 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 brainpower we are pitiable from left to rightfield). Graph 2 shows the supply and demand for vanilla extract extract crackpot 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 judge 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 we COU LD have gained if we had more vanilla ice cr! eam. 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 symmetry 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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