In the above figure, if the market is in equilibrium, area A + area B + area C equals
A) total surplus.
B) consumer surplus.
C) deadweight loss.
D) producer surplus.
E) total revenue.
B
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Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping
If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes? A) The demand for cantaloupes at $2.00 must be elastic. B) The demand for cantaloupes at $2.00 must be unit elastic. C) We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. D) The demand for cantaloupes at $2.00 must be inelastic.
What is the law of comparative advantage, and why is it important in international trade?