According to the graph shown, consumer surplus is:
A. the area above the supply curve and below the price.
B. the area above the demand curve and below the price.
C. the area under the demand curve and above the market price.
D. the area under the supply curve and above the price.
Answer: C
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Comment on the following: "Present-biased people are impatient, but impatient people don't necessarily have to be present-biased."
What will be an ideal response?
Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?
What will be an ideal response?
Refer to Figure 14-1. Should Lexus lower its price in order to deter BMW's entry into the luxury hybrid automobile market?
A) Yes, it will drive BMW out of the market. B) No, it should keep the same price and work to capitalize on its brand loyalty. C) In terms of profit earned, it makes no difference whether Lexus lowers its price or not; in either case it will make $280 million profit if BMW enters. D) No, because BMW will enter the market regardless of Lexus' decision about its price.
The current account balance of the United States began to deteriorate in
A) the late 1960s. B) the early 1970s. C) the early 1980s. D) the late 1980s. E) the early 1990s.