Consumer surplus is the area on the graph
a. above the supply curve and below the demand curve.
b. below the demand curve and above the market price.
c. that represents the gains that producers receive when they sell a product.
d. that reflect the opportunity cost of producing the a good.
B
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Economists define investment as the purchase of
A) a new physical asset such as a new machine or a new house. B) any physical asset, whether new or not, used by business to increase production. C) any physical asset used by business to increase production and the repurchase of common stock. D) business spending on capital and household spending on durable goods.
Under fiscal stabilization policy in the New Keynesian model, after a positive shock to output,
A) the government increases expenditures and the central bank increases the money supply. B) the government increases expenditures and the central bank decreases the money supply. C) the government decreases expenditures and the central bank increases the money supply. D) the government decreases expenditures and the central bank decreases the money supply.
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread,
a. more bread will be produced to meet the increased demand b. there will be an excess demand for bread c. the demand for bread will decrease because suppliers will reduce their supply d. an excess supply of bread will emerge e. a $0.50 tax must be imposed to bring equilibrium price into accord with the price ceiling
Under the adaptive expectations theory, people persistently
a. underestimate inflation when it is slowing down. b. overestimate inflation when it is accelerating. c. underestimate inflation when it is accelerating. d. adapt to the prevailing inflation rate quickly.