Use the figure below to answer the following question.
If actual production and consumption occur at Q1 and the price is P2
A. deadweight loss equals area f.
B. producer surplus equals area c.
C. producer surplus equals area c + b.
D. consumer surplus equals area a + b.
Answer: C
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The purpose of the ceteris paribus assumption used in economic analysis is to:
A. Avoid making normative statements B. Distinguish macroeconomics from microeconomics C. Make sure that all relevant factors are considered D. Focus on the effect of a single factor on a certain variable
Which of the following taxes is most likely to be shifted?
A. A general sales tax. B. A flat-rate state income tax. C. A progressive federal income tax. D. A property tax on an owner-occupied residence.
In the long run, a representative firm in a monopolistic ally competitive industry will end up:
A. Having an elasticity of demand that will be less than it was in the short run B. Having a larger number of competitors than it will in the short run C. Producing a level of output at which marginal cost and price are equal D. Earning a normal profit, but not an economic profit
If Happy Feet chooses to No Ad and Best Nails then chooses to No Ad, Happy Feet earns ________ million in net profit and Best Nails earns ________ million.
Happy Feet wants to prevent Best Nails from entering the nail salon market. The above game tree illustrates the different strategies and corresponding payoffs for the two firms. Both Happy Feet and Best Nails have the same strategies of advertising (Ad) or not advertising (No Ad). The payoffs represent net profit in millions.
A) $1; $4 B) $2; $3 C) $4; $1 D) $5; $1