Economic surplus
A) does not exist when a competitive market is in equilibrium.
B) is equal to the sum of consumer surplus and producer surplus.
C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price.
D) is equal to the difference between consumer surplus and producer surplus.
Answer: B
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In a market system, how are the price signals established?
A) Consumer advocacy groups establish fair prices for items, and most firms follow these pricing guidelines because they don't want to anger their consumers. B) Industry associations establish an acceptable price range for each commodity sold within the industry, and member firms are obligated to abide by association guidelines. C) The forces underlying supply and demand interact to determine a market clearing price. D) Federal legislation establishes maximum prices for most goods, and state governments regulate the prices of any remaining items.
Peak efficiency _________ achieved under monopolistic competition.
Fill in the blank(s) with the appropriate word(s).