Consider a market characterized by the following inverse demand and supply functions: PX = 40 - 4QX and PX = 10 + 2QX. Compute the surplus received by consumers and producers.
A. $50 and $25, respectively.
B. $40 and $20, respectively.
C. $20 and $40, respectively.
D. $25 and $25, respectively.
Answer: A
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Suppose research indicates that the effects of a one degree increase in Earth's average temperature would be much more devastating than previously believed. Therefore, the greater the marginal benefit of reducing greenhouse gases, other things constant,
a. the lower the optimal level of emissions b. the higher the optimal level of emissions c. the likelier that the level of emissions would have no effect d. the lower the optimal level of cleaner air e. None of the answers is correct
It is difficult to know whether an economy is in or moving toward equilibrium because
a. an economy is always at rest, which is equilibrium b. the economy only changes when it moves from one equilibrium level to another c. our economy is always at full employment, which is regarded as an equilibrium position but changes in the rate of inflation at full employment suggest that it can surpass equilibrium d. there is always increasing inflation coupled with low productivity growth e. economic changes are continuous so that an equilibrium level is difficult, if not impossible, to identify
When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically:
A. positive. B. negative. C. less than one. D. greater than one.
The reason that the expected inflation rate matters in determining the impact on borrowers or lenders is that
A. higher interest rates mean higher payments. B. interest rates depend on actual inflation, rather than expected inflation. C. lower interest rates mean lower payments. D. interest rates depend on expected inflation, rather than actual inflation.