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Gains From Trade

Consumer Surplus

Quantifying Welfare E ects

Producer Surplus

Welfare in Equilibrium

Producer Surplus

Q: What about gains from trade for the producer? A: Changes in a firm’s welfare be measured in dollars as much as for the consumer Producer Surplus = the area above the supply curve and under the price line.

Price

Producer surplus

Supply curve = marginal cost

p

Snuggly blankets

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