Explain why underproduction or overproduction of a good results in efficiency losses
Please provide the best answer for the statement.
When there is underproduction or overproduction of a good, the area of the consumer and producer surplus is reduced. For output levels below the equilibrium output, the maximum willingness to pay by consumers exceeds the producer’s minimum acceptable price, so there is a dead weight loss to society. For output levels above the equilibrium output, the maximum willingness to pay by consumers is less than the producer’s minimum acceptable price, so there is a dead weight loss to society.
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In the above figure, at which point on the demand curve is the price elasticity of demand equal to 1?
A) a B) b C) c D) It is impossible to say at which point the elasticity equals one.
If currencies around the world are based on the gold standard, and Japan raises the amount of gold for which the yen will trade, then holding all else constant,
A) the value of U.S. exports to Japan in terms of the yen will increase. B) the value of the yen relative to the dollar will stay constant. C) the yen will appreciate against the dollar. D) the yen will depreciate against the dollar.
At the minimum efficient scale
A) all possible economies of scale have not been exhausted. B) marginal cost is at its minimum. C) the firm has achieved the lowest possible average cost of production. D) any increases in the scale of operation will encounter further economies of scale.
Keynes believed that the best method for boosting an economy during a recession was to: a. increase money supply so that individuals would have more incentive to spend
b. cut government spending and increase taxes to reduce or even eliminate fiscal deficit. c. increase government spending and cut taxes so that consumers could spend more. d. cut both government spending and taxes to reduce government expenditure in the economy. e. increase both government spending and taxes to increase the role of government in the economy.