Assume that initially the economy is in equilibrium in all markets such that all goods cost a
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Assume that initially the economy is in equilibrium in all markets such that all goods cost a dollar to produce, sell for a dollar, and have a marginal benefit of a dollar.
a. Firm A discovers a new product that proves popular and makes huge profits. How are consumers better off?
b. Instead of the above, Firm B discovers a way to produce its current output at 10¢ a unit and makes huge profits. If it does not lower its price, how are consumers better off?
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