What is producer surplus? What does producer surplus measure?
What will be an ideal response?
Producer surplus is the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives. Producer surplus measures the net benefit received by producers from participating in a market.
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If government spending exceeds the amount of taxes collected from households and businesses, the government simply finances the difference by printing more money
Indicate whether the statement is true or false
Which of the following would shift the demand curve for gasoline to the right?
a. a decrease in the price of gasoline b. an increase in consumer income, assuming gasoline is a normal good c. an increase in the price of cars, a complement for gasoline d. a decrease in the expected future price of gasoline
If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption will
a. shift outward relative to the original optimum. b. move leftward along the original budget constraint. c. shift inward relative to the original optimum. d. not change.
Based on the graphs for an increase in aggregate demand and the Phillips curve, we can see that when inflation is low, ______.
a. RGDP is high
b. unemployment is low
c. aggregate demand is weak
d. aggregate demand is strong