If a perfectly competitive market is in equilibrium and then market demand increases, which of the following would happen?
a. producer surplus would definitely increase and consumer surplus may increase or decrease
b. producer surplus would definitely decrease and consumer surplus may increase or decrease
c. consumer surplus would definitely decrease and producer surplus may increase or decrease
d. consumer surplus would definitely increase and producer surplus may increase or decrease
e. producer and consumer surplus would remain unchanged
A
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The income elasticity of demand is ________ if the good is ________ good
A) positive; a normal B) positive; an inferior C) negative; a normal D) less than one; an inferior E) positive; a substitute
Following the U.S. financial crisis in 2008, some observers assert that the policies of Fed Chairman Greenspan contributed to the crisis. Which of the following is a criticism of Greenspan's policies?
I. The very low interest rates used to fight the 2001 recession were maintained for too long, leading to the real estate bubble. II. The Fed provided real estate developers with liquidity to encourage property development and offered tax breaks to first-time home buyers, which in turn fueled the real estate bubble. III. The Fed did not promote appropriate regulations to deal with the new financial instruments that were created in the early 2000s. A) I and II only. B) I and III only. C) II and III only. D) I, II, and III.