Category: Economics

Suppose a firms tax rare is 25%. What effect would an 8.25 million

With two firms in the market, the market quantity supplied at $6 is

➤ Why does the competitive equilibrium maximize total surplus but not always consumer surplus?
Competitive equilibrium equates marginal benefit and marginal cost, which maximizes total surplus and eliminates deadweight loss. That allocation balances gains between consumers and producers. Consumer surplus alone can fall or rise with price shifts, so policies that help consumers may reduce producer surplus and total welfare if they change quantity away from equilibrium.

Demand is given by and the price is $20. What is consumer surplus?

➤ Why do decreasing returns to scale matter for long-run costs and firm size?
Decreasing returns imply output rises less than proportionally with inputs, so average cost tends to increase as a firm expands. Firms face rising long-run average cost curves, which limits optimal firm size and encourages many smaller firms rather than a single giant producer.