Question

Equilibrium Supply price A Low Demand price Multiple Choice Figure 4-1 32. In Multiple Choice Figure 4-1, consumer surplus is shown by a. area A b. area B c. area C 33. In Multiple Choice Figure 4-1, producer surplus is shown by d. area A+B a. area A b. area B 34. In Multiple Choice Figure 4-1, social surplus is shown by c. area C d. area A B a. area A b. area B c. area C d. area A+B 35. In Multiple Choice Figure 4-1, deadweight loss is shown by- a. area A b. area Bc. area C d. area A+B Bonus Questions 36. "Last October, due to some early unexpected frost, the average price for a pumpkin increased by 10% compared to the average pumpkin price in previous Halloween seasons. The frost, it seems, destroyed more than just a small portion of the pumpkin crop in nearby states. As a result, the quantity demanded county-wide decreased from 2 million to 15 million." Based on this statement demand was price inelastic demand was price elastic demand was unit elastic the demand curve had shifted to the right b. 37. At a local ice cream parlor, when the price was lowered by fifty cents on take-out half-gallons of all flavors, total revenue from the sale of chocolate decreased but total revenue from the sale of vanilla increased. This is a clear indication that there are more people who like vanilla than there are people who like chocolate the demand for chocolate is price inelastic and the demand for vanilla is price elastic the demand for chocolate is price elastic and the demand for vanilla is price inelastic d. the demand curve for chocolate has shifted leftward and the demand curve for vanilla has shifted rightward

Answer 1

32. Consumer surplus is the area below the demand curve and above the price line. In the figure given, consumer surplus is A.

33. Producer surplus is the area above the supply line and below the supply curve. In the above figure, producer surplus is B.

34. Social surplus is the total surplus in the economy, In the above figure, total surplus is A + B.

35. Deadweight loss is the loss in efficiency in the economy due to government intervention. In the above figure, deadweight loss is C.