When the Price of a Good Increases and All Else

question 96

Multiple Choice

When the price of a good increases and all else is held constant

• A) both consumer surplus and producer surplus decrease.
• B) both consumer surplus and producer surplus increase.
• C) consumer surplus decreases.
• D) producer surplus decreases.
• E) producer surplus increases.

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Definitions:

Period Cost

Costs that are not directly tied to the production process and are expensed in the period they are incurred.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits one could have received by taking a different action.

Variable Cost

Costs that directly correspond with the degree of production or output levels.

Period Costs

Costs that are not directly tied to production and are expensed in the period in which they are incurred, such as selling, general, and administrative expenses.