If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will
a. increase producer surplus.
b. reduce producer surplus.
c. not affect producer surplus.
d. Any of the above are possible.
a
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A person who voluntarily quits their job in New York and expects to get a similar job in Los Angeles is an example of
Pat bought a new car for $15,500 but was willing to pay $24,000 . The consumer surplus is
a. $8,500. b. $15,500. c. $24,000. d. $39,500.
In the presence of positive externalities, a free market will choose a price which is too ____ and produce an output which is too ____ compared with the social optimum.
A. high; low B. low; low C. high; high D. low; high
Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss
As shown in Exhibit 3A-2, if the market price falls from P1 to P2, then:
A. total surplus increases. B. deadweight loss increases. C. overproduction increases. D. underproduction decreases.