Can both producer surplus and consumer surplus exist at the same time in a particular market?
What will be an ideal response?
Yes. The actual price can be above the seller's marginal cost and below the buyer's maximum purchase price. So, buyer and seller can both earn a surplus on the same transaction.
You might also like to view...
Refer to the above diagram. All data are for the short run. If product price is P3, the firm will:
A. shut down. B. produce Q5 units and break even. C. produce Q4 units and break even. D. produce Q4 units and make an economic profit.
Rent-seeking behavior refers to
A. a transfer of knowledge between private and public sectors. B. companies that try to increase profit by cutting costs or improving products. C. companies that spend money on influencing government rather than on profit-increasing strategies. D. consumer real estate studies that focus on renting versus buying.
Most economists believe that:
A. a policy decision must weigh the costs of market failure against the costs of government failure. B. government cannot correct failures of market outcome. C. a government policy designed to correct the failure of a market outcome is always more desirable than living with the failure. D. it is always better to change the price structure by subsidizing goods than to openly give money to individuals to achieve distributional goals.
If a certain household earns and spends $24,000 per year and, on the average, holds a money balance of $6,000, then the velocity of money for this household is:
A. 6. B. 1/6. C. 4. D. 1/4.