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This summary explores various economic concepts illustrated through a series of figures demonstrating efficiency in consumption, production, and product-mix. Key illustrations include the efficiency of consumption allocations, the utility possibility frontier, social welfare maximization, and cost and profit optimization. Each figure provides valuable insights into the theoretical underpinnings of economic efficiency, welfare economics, and externalities, allowing for a better understanding of market dynamics and resource allocation strategies.
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Figure 5.1 Efficiency in consumption. BY AXb AXa A0 S AX IB1 IB0 IA a . BYa AYa b BYb . AYb IB1 IB0 IA BX B0 BXa BXb T AY
Figure 5.2 Efficiency in production. KY LXb LXa X0 LX IY1 IY0 IX a . KYa KXa b KYb . KXb IY1 IY0 IX LY Y0 LYa LYb KX
Figure 5.3 Product-mix efficiency. Y I YM a Ya b Yb c Yc I XM X 0 Xa XC Xb
Figure 5.4 The set of allocations for consumption efficiency. BY A0 S AX B A C B A B A B A B B A . A B A B A B A C A B BX B0 T AY
Figure 5.5 The utility possibility frontier. UB T Z S R UA 0
Figure 5.6 Maximised social welfare. UB W a b c W UA 0
Figure 5.7 Welfare and efficiency. UB D E C W2 W1 UA 0
Figure 5.8 Utility maximisation. Y Ymax U* a b Y* U* c X 0 X* Xmax
Figure 5.9 Cost minimisation. Y K3 X* K2 a K1 b c X* L 0 L3 L1 L2
Figure 5.10 Profit maximisation. P, c Marginal cost PX X 0 X*
Figure 5.12 The efficient level of supply for a public good. £ MRUSA + MRUSB = MWTPA + MWTPB MC = MRT MRUSB = MWTPB MRUSA = MWTPA X X*
Figure 5.13 The bargaining solution to an externality. £ MB MEC a c b d Hours of music 0 M* M0
Figure 5.14 Taxation for externality correction. £ SMC PMCT PMC PY t Y 0 Y* Y0
Figure 5.15 The polluting monopolist. £ DY SMC PYt e f PY0 PMC b a c DY d MRY Y 0 Y0 Y* Yt Yc
