What is consumer surplus?
a) a buyer's willingness to pay, minus price
b) a buyer's willingness to pay, plus price
c) the price of the product minus the buyer's willingness to pay
d) the price of the product plus the buyer's willingness to pay
Ans: a) a buyer's willingness to pay, minus price
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Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in
A) a larger proportion of good cars being sold and consequently, consumer surplus is increased. B) an equal proportion of good cars and lemons being sold in an inefficient market. C) a larger proportion of lemons being sold and consequently, producer surplus is increased. D) an equal proportion of a good cars and lemons being sold in an efficient market.
If the money supply grows faster than the rate of growth in GDP
A) prices fall. B) interest rates fall. C) prices rise. D) none of these choices.