In the above figure, suppose the government subsidizes the production of milk so that milk production increases to 8 million gallons per day
What is the size of the deadweight loss? (Hint: It is equal to the triangular area of negative consumer and producer surplus that results when output exceeds the efficient level.) A) $12.5 million
B) $6.25 million
C) $4.50 million
D) $2.25 million
D
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Average total cost equals
A) the change in total cost divided by the change in output. B) total fixed cost divided by output. C) average fixed cost plus average variable cost. D) total cost minus total variable cost. E) average fixed cost plus average variable cost plus marginal cost.
Suppose the market-clearing price of wheat is $2.50 per bushel. At a price below $2.50,
A) supply would equal demand. B) quantity supplied would equal quantity demanded. C) quantity supplied would exceed quantity demanded. D) quantity supplied would be less than quantity demanded.
Wister and Narsum produce household appliances. Which of the following actions could be considered collusive?
a. Wister sets a price that maximizes its profits. b. Narsum becomes the price leader in the industry by increasing output. c. Wister has a strategy to react to any pricing changes made by Narsum. d. Narsum agrees to divide mutual profits with Wister.
For which of the following purchases would the absolute price elasticity of demand be greatest?
A) a luxury sedan B) utilities C) chewing gum D) a smartphone