If a Price Above the Equilibrium Price Is Imposed in a Perfectly

question 119

Multiple Choice

If a price above the equilibrium price is imposed in a perfectly competitive market,

• A) any price reduction will reduce total economic surplus.
• B) any price increase will increase total economic surplus.
• C) leaving the price at this value will increase total economic surplus.
• D) reducing the price to the equilibrium price will increase total economic surplus.
• E) reducing the price to zero will increase total economic surplus.

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Definitions:

Adjustment Agreement

A contract or understanding that allows for modifications to be made to the terms of an agreement or deal, adapting to new conditions or information.

COLA

Cost of Living Adjustment, an increase in income to keep up with living expenses, often applied to salaries and benefits to offset inflation.

Misery Index

An economic indicator created by summing the unemployment rate and the inflation rate, intended to measure the average citizen's financial hardship.

Unanticipated Inflation

Inflation that occurs when people do not expect it, leading to negative impacts on savings and purchasing power.