Use the following figure showing the domestic demand and supply curves for product B in a hypothetical economy to answer the next question.
After trade, at a world price of Pw, producer surplus equals areas
A. B + C + E + F.
B. E + F.
C. B + C + D + E + F.
D. B + C + D + E + F + G.
Answer: C
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A price ceiling imposed by the government:
A) can create situations of excess demand. B) is a tax that increases the market price of a good. C) involves pricing a commodity above the market price. D) helps in establishing equilibrium in case of shortage or surplus.
Resource use is efficient when production is such that marginal social benefit is
A) greater than marginal social cost. B) equal to marginal social cost. C) less than marginal social cost. D) at its maximum value.
Suppose our firm produces chartered business flights with capital (planes) and labor (pilots) in fixed proportion (i.e., one pilot for each plane). The expansion path for this business will:
A) increase at a decreasing rate because we will substitute capital for labor as the business grow. B) follow the 45-degree line from the origin. C) not be defined. D) be a vertical line.
As disposable income grows,
A. both autonomous C and induced C rise. B. both autonomous C and induced C fall. C. autonomous C falls and induced C rises. D. autonomous C stays the same and induced C rises.