If a market produces a level of output below the competitive equilibrium, then
A) social welfare is not maximized.
B) consumer surplus might still be maximized.
C) the actual price will be below the equilibrium price.
D) social welfare might still be enhanced if a price ceiling keeps price below the competitive price.
A
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Suppose the money market is in the liquidity trap and the Fed increases the supply of money. We expect that
A) people will end up willingly holding more money. B) the excess money holdings will flow into the loanable funds market and there will be a decrease in interest rates. C) interest rates will increase, since the demand curve for money is upward sloping in this case. D) eventually, via the transmission mechanism, Real GDP will increase.
An annually balanced federal budget
A. enables fiscal policy to be implemented in a timely and selective manner, without the drag on consumption and saving that is usually associated with federal borrowing. B. essentially eliminates the use of fiscal policy for stabilizing the economy. C. could bring the economy up to full employment if a deflationary GDP gap exists. D. would reduce tax collections, thereby stimulating aggregate demand.