What is the significance of the concepts "consumer surplus" and "producer surplus"?
What will be an ideal response?
Each is a measure of economic welfare or well-being. The more consumer surplus a buyer can gain from a transaction, the greater is consumer welfare. The more producer surplus a seller can gain from a transaction, the greater is producer welfare. Total surplus is equal to the sum of consumer and producer surplus.
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Refer to Negative Externality. According to a Pigovian analysis of this externality, when a tax of $5 per unit is imposed on the firms in this industry, the external costs created by the firms' production will equal
The following questions refer to the accompanying diagram, which shows the effects of a negative externality created by an industry's production. The equilibrium quantity in the absence of any attempt to internalize the externality is QE, and the optimal quantity according to a Pigovian analysis is QO.
a. area C + D + E + G + H.
b. area C + D + G + H.
c. area C + G.
d. zero.
The Federal Reserve focuses on the inflation rate based on the ________ rather than the CPI; to measure the underlying trend in inflation, it focuses on the ________
A) GDP deflator; overall GDP deflator B) GDP deflator; core GDP deflator C) PCE price index; core PCE price index D) PCE price index; overall PCE price index
If one country can produce a good with fewer resources than another country, this is called:
A. specialization. B. geographic advantage. C. comparative advantage. D. absolute advantage.
Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy?
A. 800 million B. 250 million C. 1.6 billion D. 1.0 billion