Refer to the Following Graph

question 29

Multiple Choice

Refer to the following graph. Suppose this graph represents the market for cheese. In order to keep the price of cheese at Pf, government must:

• A) devise a mechanism to ration cheese to consumers.
• B) cause the supply of cheese to increase.
• C) cause the demand for cheese to decrease.
• D) prevent the excess supply from reaching the market.

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Definitions:

Accounting Profits

The total revenue of a company minus the explicit costs and depreciation.

Normal Profits

The return to the business owners for the opportunity cost of their implicit inputs.

MRP

Marginal Revenue Product, a term in economics that represents the additional revenue generated by employing one more unit of a factor, such as labor or capital.

Investment

The allocation of resources, such as capital or time, in order to generate future profit or income.