The Market for New Automobiles Is Not Likely to Maximize

question 25

Multiple Choice

The market for new automobiles is not likely to maximize total economic surplus because

• A) of price ceilings on automobiles.
• B) the market is not perfectly competitive.
• C) of price floors on automobiles.
• D) automobiles are allocated on first-come,first-served basis.
• E) consumers negotiate prices.

---

Definitions:

Consumer Surplus

The divergence between the expected payment by consumers for a product or service and the actual payment made.

Producer Surplus

The difference between the amount producers are willing and able to supply goods for versus the amount they actually receive due to market prices.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net gain to society from the production and consumption of goods and services.

Tariff Revenue

Income that a government collects from imposing duties on imported goods.