Thursday, December 13, 2007

Producer Surplus

Q:

In the notes for Class 2 and Class 3, it says that Producer Surplus as we have defined it, strictly speaking, only applies to basic factors like land, labor, capital. What is the reason for this? For the purpose of the exam, do we just assume that it applies?

A:

Yes. You don't have to worry about this. I woule explain further but would probably do more harm than good. :)

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