(Figure: Determining Surplus and Loss) Consider the Graph

question 182

Multiple Choice

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, producer surplus:

• A) increases by $50 and deadweight loss increases by $30.
• B) increases by $50 and deadweight loss increases by $70.
• C) decreases by $50 and deadweight loss increases by $30.
• D) decreases by $190 and deadweight loss increases by $70.

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Definitions:

Market Rate

The typical interest rate or cost of borrowing money in the general market, often referred to in terms of loans and savings.

Coupon Rate

The interest rate paid yearly on a bond, depicted as a percentage of its face value.

Premium On Bonds

The amount by which the selling price of a bond exceeds its face value.

Present Value Factors

The factors used in calculating the present value of a sum of money or a stream of cash flows given a specified rate of return.