What Happens to the Amount of Consumer Surplus and Producer

question 169

Multiple Choice

What happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left) ?

• A) Producer surplus declines and consumer surplus is unchanged.
• B) Consumer surplus declines and producer surplus is unchanged.
• C) Consumer surplus declines and producer surplus declines.
• D) Consumer surplus is unchanged and producer surplus is unchanged.
• E) Producer surplus increases and consumer surplus increases.

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Definitions:

Cost-Plus Approach

A pricing strategy where a fixed percentage or fixed amount is added to the total cost of producing a product or delivering a service to determine its selling price.

Projected Selling Price

The anticipated price at which a product is expected to be sold in the future, considering factors such as cost, market demand, and competition.

Unnecessary Costs

Expenses that do not add value to the product or service and could be eliminated without affecting the quality or output.

Variable Factory Overhead

This includes costs of factory operations that vary directly with the volume of output, such as utilities and supplies used in production.