If the Demand for Widgets Decreases, This Will

question 23

Multiple Choice

If the demand for widgets decreases, this will:

• A) increase the supply of inputs used to produce widgets.
• B) decrease the supply of inputs used to produce widgets.
• C) increase the demand for inputs used to produce widgets.
• D) decrease the demand for inputs used to produce widgets.

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Definitions:

Socially Optimal Output

The level of production of goods and services that results in the most efficient allocation of resources, typically considered at the point where marginal social cost equals marginal social benefit.

Ceiling Price

A legally imposed maximum price that can be charged for a good or service, intended to prevent prices from becoming too high.

Allocative Efficiency

A condition of distributing resources where improving the situation of one person results in the detriment of another.

Economic Profits

The surplus remaining after deducting both the explicit and implicit costs from total revenues; represents extra earnings above the next best alternative.