The two characteristics of a public good are:

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's

A) total revenue increases, but total cost rises by more so that the farmer's total profit decreases. B) total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. C) total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. D) marginal revenue increases, but so does marginal cost, so that the farmer's total profit increases. E) total revenue and total cost both rise, but the effect on the farmer's total profit is uncertain.

Suppose a firm has market power and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping. If the firm reduces its price, then:

A) consumer and producer surplus must increase. B) consumer surplus increases, producer surplus may increase or decrease. C) consumer surplus increases, producer surplus must decline. D) consumer and producer surplus must decline.