Prices below the free market equilibrium price are inefficient because:
A. producer surplus is lower than in equilibrium.
B. consumer surplus is higher than in equilibrium.
C. total surplus is lower than in equilibrium.
D. total surplus is higher than in equilibrium.
Answer: C
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In the above figure, at the efficient quantity of CDs
A) total consumer surplus is zero. B) total producer surplus is zero. C) the sum of consumer surplus and producer surplus is maximized. D) Both answers A and B are correct.
Crucial assertions in the menu-cost literature are that those costs ________ be large for them to have an effect on firms' pricing, while potential total welfare losses ________ menu costs that have been avoided
A) need not, may be several times larger than B) need not, are generally much less than C) must, may be several times larger than D) must, are generally much less than
In the above figure, what would result if the price was $40?
A) a surplus B) a shortage C) equilibrium D) excess demand
List four reasons why people save
What will be an ideal response?