Diamond- Water Paradox - Adam Smith• Weight- must have mass. How much does a paragraph weigh?• Everything that has a price must have something in common, what is this common stuff?• Value- it could be either of the two• Labor • Utility• Smith concludes a labor base approachWhy does economic profit vanish under competitive markets? Perfect info, easy to get in and out “Super Profit”- doing better than the market thinks you’re entitled too Example: Grocery Store- you can move to any line, will any line be consistently short? no Perfect competition will equalize the return on scarce resources There is no super rate of returnCost Problem.:Labor and Quantity would be provided, calculate fixed costs and variable costs, TC, AVC, ATC, MCREAD CH 9- ECONOMIES AND DISECONOMIES OF
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