Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?
The consumer's surplus from a purchase is equal to the difference between the maximum amount the consumer would be willing, if necessary, to pay for the item bought, and the price that the market actually charges. The producer's surplus from a sale is the difference between the market price of the item sold and the lowest price at which the supplier would be willing to provide the item.
A rational consumer will leave the market without purchasing any amount of output if the market price is higher than the maximum price which he is willing to pay for.
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The Lucas Wedge shows
A) the negative impact inflation has on consumer spending. B) whether a country needs to slow its real GDP growth rate. C) the positive impact lower taxes have on real GDP. D) the negative impact a slowdown in real GDP growth has on potential GDP. E) the increased impact of government spending on real GDP.
Refer to Figure 18-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area
A) B + C + F + G. B) E + H. C) F + G. D) B + C.
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Exhibit 30-5
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The amount of government expenditures on a project or program should continue to increase for as long as the marginal benefits exceed the marginal costs
a. True b. False Indicate whether the statement is true or false