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The apple machine proves Romer's point. Suppose to produce apples you needed that machine then is competitive provision possible? If you pay all factors of production their marginal products, there is nothing left to pay for the machine. The same is true for ideas. Thus, the issue with non-rivalry is that you can't get a competitive equilibrium that pays for all production. And this is the point. This happens all over the place. That is why perfect competition doesn't actually arise in reality. So why would we care about questions of whether it can arise?
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At SpringRolls, if you do the all you can eat option, then if you don't eat an order you have to pay for it. So the marginal cost curve is not how you have drawn it here.
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Jun 19, 2014