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    Case Study: The Price System

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    See the attached file for complete problem (along with data).

    CHAPTER 14

    THE CASE FOR FREE MARKETS I:
    THE PRICE SYSTEM

    ACTIVITY

    Reminder: For consumers following the Optimal Purchase Rule: MU=P.
    Use the Q of chairs and the P (MU) as the Demand Schedule.
    For firms under conditions of perfect competition, P=MR
    To maximize their profits, they must produce where: MR=MC.
    (You have to calculate MC from Total Cost given above.)
    Use the Q of chairs and the MC figures as the Supply Schedule.

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    https://brainmass.com/economics/general-equilibrium/case-study-the-price-system-517916

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    Solution Preview

    1. a) See the attached file. The efficient level of output is where MU = MC. In this case, the efficient level of output is 5 chairs.
    b) Demand schedule: P = MR = MU and Qd = number of chairs
    Supply schedule: P = MC and Qs = number ...

    Solution Summary

    This solution presents mathematical analysis of a case study of the market for chairs in a community. The topics covered are:
    1. Marginal utility and total cost
    2. The efficient level of output
    3. Market inefficiency
    4. Price ceilings and price floors
    Step by step calculations with explanations are provided.

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