Refer to the Graph Shown

question 148

Multiple Choice

Refer to the graph shown. If the government imposed a price ceiling of $4, producer surplus would:

• A)increase from 2 to 4.
• B)increase from 4 to 8.
• C)fall from 8 to 2.
• D)fall from 16 to 4.

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Definitions:

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be consumed by many people without depleting and without preventing others from consuming it.

Nonrival

A good or service is nonrival if its consumption by one individual does not reduce its availability to others.

Nonexcludable

A characteristic of public goods: Once a good is produced, no one can be excluded from enjoying its benefits.

Marginal Social Benefit

The additional gain to society as a whole from consuming or producing one more unit of a good or service.