Consider a competitive market for cheese, with 2 producers and 4 consumers. Neither firm has any foxed costs. The table shows marginal production costs and marginal values for various customers. a) Sketch the situation using a demand and supply framework I b) What quantity of cheese is sold at what price? c) What is the total value of cheese traded? What is the \"market\" value (money exchanged) of the traded? What is the total cost of producing said cheese? What is the total surplus generated? d) TRUE or FALSE - Consumer surplus value would increase if prices were capped at $4 e) TRUE or FALSE - Producer Surplus value would increase if a minimum price was set at $10 f) TRUE or FALSE - If the world demand is perfectly elastic at $10, then total surplus would increase g) Suppose Firm A and B merge and decide that rather than compete they want to maximize profits! They do this by setting price! What price do they charge? What quantity do they sell? Do their profits go up? What happens to consumer surplus value? What happens to total surplus value?
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The demand curve represents the marginal value for various customers, and the supply curve represents the marginal production costs for the producers. Show more…
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