Efficiency occurs in a market when
A) the sum of consumer surplus and producer surplus is maximized.
B) consumer surplus is equal to producer surplus.
C) consumer surplus is less than producer surplus.
D) consumer surplus is greater than producer surplus.
E) total revenue is maximized.
A
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Comment on the following statement: "If a firm shuts down in the short run, it will earn zero economic profit."
What will be an ideal response?
To lower long-term interest rates, in 2010 the Fed started its new open market operation program to purchase
A) mortgage-backed securities. B) commercial papers. C) long-term Treasuries. D) Treasury bills and Treasury notes.
The average cost of production at the profit maximizing output level for Jones Inc, is $4 per unit. The average variable cost of production is $3.5 per unit at this output level. The introduction of cheaper substitutes reduces the demand drastically and the market price falls to $1.5 per unit. If the minimum average variable cost the firm must incur is $2.5, identify the correct statement from
the following. a. There are output levels where revenue exceeds variable cost when the price is $1.5 per unit. b. The firm will continue to operate in the short run. c. The firm will breakeven at the price of $1.5 per unit. d. The firm will shut down.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. When trade opens up, the United States should produce:
A. apples, since they have a comparative advantage in the production of apples, and not trade. B. only apples, since they have a comparative advantage in the production of apples, and trade for shoes. C. only shoes, since they have a comparative advantage in the production of shoes, and not trade. D. both goods, since they have an absolute advantage in both goods, and not trade.