Briefly describe the relationship between deadweight loss and consumer and producer surplus.
What will be an ideal response?
A deadweight loss is the reduction in both consumer and producer surpluses—it is the net loss of total surplus that results from the misallocation of resources. In short, a deadweight loss measures the consumer and producer surplus that is destroyed. The deadweight loss gets larger and larger as we move further and further away from the efficient equilibrium output.
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If the Fed buys U.S. government securities from banks, the federal funds rate ________ and banks' reserves ________
A) does not change; increases B) falls; decrease C) rises; increase D) rises; decrease E) falls; increase
Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?
A) 8.99 percent B) 8.00 percent C) 9.41 percent D) 8.62 percent E) 9.12 percent
In an oligopoly market, firms do not produce identical product
a. True b. False Indicate whether the statement is true or false
The deadweight loss associated with a tax on a commodity is generated by
a. the consumers who still choose to consume the commodity but pay a higher price that reflects the tax. b. the consumers who choose to not consume the commodity that is taxed. c. all citizens who are able to use services provided by government. d. the consumers who are unable to avoid paying the tax.