Refer to the information provided in Figure 4.6 below to answer the question(s) that follow.Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6Refer to Figure 4.6. Consumer surplus changes by the area [E - C] if price goes from equilibrium to
A. P1.
B. P3.
C. < P1.
D. > P3.
Answer: A
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If a good that generates negative externalities were priced to take these negative externalities into account, its
A. price would remain constant and output would increase. B. price would increase but its output would remain constant. C. price would increase, and its output would decrease. D. price would decrease, and its output would increase.
The major advantage of a market economy is that
a. it maximizes the need for resource-flow data b. prices convey most of the information necessary to coordinate economic activity among firms c. data are aimed at central planners d. prices are essentially meaningless e. All of the answers are correct
All other things constant, if the interest rate decreases on account of a monetary policy: a. the demand for investment curve shifts to the right
b. the demand for investment curve shifts to the left. c. there is a downward movement along the demand for investment curve. d. there is an upward movement along the demand for investment curve. e. real GDP decreases.
The formula to compute the spending multiplier is:
a. 1 / (MPC + MPS). b. 1 / (1 ? MPC). c. 1 / (1 ? MPS). d. 1 / (C + I).