The figure below shows the supply and demand curves for jeans in Smallville.
The equilibrium price will NOT lead to the largest possible total economic surplus if:
A. the market for jeans is perfectly competitive.
B. the production of jeans generates air pollution.
C. there are diminishing returns in the production of jeans.
D. jeans are purchased by consumers with reservation prices greater than $40.
Answer: B
You might also like to view...
Which of the following changes aggregate supply and shifts the aggregate supply curve?
i. change in the price level ii. change in potential GDP iii. change in the money wage rate A) i only B) ii only C) iii only D) ii and iii E) i, ii, and iii
The user cost of capital is negatively related to ________
A) the real rate of interest B) the depreciation rate C) the expected rate of change of the real price of capital D) the tertiary log of the nominal price of capital
If the ________ of a forecast outweighs its ________, the forecast can ________ a firm's profit.
A) cost; benefit; double B) cost; benefit; increase C) benefit; cost; increase D) benefit; cost; decrease
A monopolist's cost curves may shift down because
a. large-scale input purchases may permit the monopolist to take quantity discounts. b. of advertising expenditure. c. competitors are pushed out of the market. d. of bureaucratic inefficiencies.