How are producer and consumer surpluses maximized in a competitive market?
What will be an ideal response?
The consumer surplus is the difference between the maximum prices consumers are willing to pay and the market price of the product. The producer surplus is the difference between the minimum prices the producers are willing to accept and the market price. At equilibrium in the competitive market, the maximum willingness to pay of the consumers exactly equals the minimum acceptable price for producers. This condition maximizes the surplus received by both consumers and producers, which would otherwise be smaller if the price was different.
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For this reason, they are considered to be "off budget."
What will be an ideal response?
The market mechanism may best be defined as
A. Price regulation by government. B. The use of market prices and sales to signal desired output. C. The use of market signals and government directives to select economic outcomes. D. The process by which the production possibilities curve shifts inward.
The maximum amount by which the entire banking system can create money is equal to:
a. a fraction of its excess reserves. b. a fraction of its required reserves. c. a multiple of its total reserves. d. a multiple of its excess reserves. e. its excess reserves.
In general in the U.S., persons classified as poor have money income that amounts to
A. less than half the median income. B. three quarters of the median income. C. the median income. D. half the median income.