According to the text, when management selects a price or quantity, it also selects the other. Explain why this is true.
What will be an ideal response?
The firm’s demand curve determines what quantity can be sold at various prices. Each point on the demand curve represents a price-quantity pair. Therefore, selecting one means selecting the other.
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In the production possibilities frontier model, an unattainable point lies
A) both on and outside the production possibilities frontier. B) only outside the production possibilities frontier. C) only inside the production possibilities frontier. D) only on the production possibilities frontier itself. E) There are no unattainable points in the production possibilities model.
In the above figure, if a subsidy is granted to producers that generates an efficient level of production, then the deadweight loss will be
A) zero. B) $500 C) $1,000. D) $2,000.