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economics.A benevolent social planner discovers a market? - brave32 - 10-12-2012 10:25 PM
A benevolent social planner discovers a market in which supply and demand are determining equilibrium price and quantity. On a diagram of this market, indicate the reduction in total surplus that would occur if the planner decides to reduce production of the good. Explain in words. On another diagram, indicate the reduction in total surplus that would occur if the planner decided to increase production of the good. Explain.
- Jurij-EU - 10-12-2012 10:33 PM
In first case supply curve shifts left, thus reducing area below demand curve and above supply curve.
Second diagram might be related to too high external costs, or specific case with uncommon supply curve.