Use the figure below to answer the following question.
If actual production and consumption occur at Q1 and the price is P1
A. deadweight loss equals area b.
B. producer surplus equals area c + b.
C. consumer surplus equals area a + b.
D. consumer surplus equals area a.
Answer: C
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Which of the following tools cannot be used by the government to maintain a fixed exchange rate?
A. rationing of foreign exchange B. currency market intervention C. controlling the flow of trade through various barriers D. keeping its level of international reserves strictly fixed
The law of demand implies that, other things remaining the same
A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase. B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease. C) as income increases, the quantity of cheeseburgers demanded will increase. D) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.
Briefly answer the following questions
(a) What is a foreign currency option? Is there any difference between a European and American option? (b) Why might you prefer an option over a futures or forward contract? (c) When can a gain be made by the holder of a call option? A put option?
The fraction of deposits banks are required to keep as reserves is called the:
A) deposit requirement. B) reserve requirement. C) excess reserve requirement. D) none of the above.