Explain the concepts of consumer surplus, producer surplus, and cooperative surplus
What will be an ideal response?
Consumer surplus refers to the maximum amount a buyer would be willing to pay for a good or service less the price he or she actually pays. Producer surplus refers to the amount a seller receives for a good or service beyond the minimum he or she would be willing to sell the good for. Cooperative surplus is the sum of all the net benefits received by the parties to a transaction, so it is the sum of consumer surplus and producer surplus.
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Which of the following is evidence of a shortage of chocolate?
A) The price of chocolate is raised in order to increase sales. B) Firms lower the price of chocolate. C) The equilibrium price of chocolate falls due to a decrease in demand. D) The quantity of chocolate demanded is greater than the quantity supplied.
Expenditure and tax multipliers are likely to be large
A) if the economy is experiencing deflation. B) when real interest rates rise rapidly. C) during severe recessions. D) if the economy has negative cyclical unemployment.