Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss

question 86

Multiple Choice

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss
-As shown in Exhibit 3A-1, if the market price falls from $3.00 to $2.00, then:

• A) total surplus increases.
• B) deadweight loss increases.
• C) overproduction increases.
• D) underproduction decreases.

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Definitions:

Basis of Stock

The original value of an asset for tax purposes, usually the purchase price, which is used to calculate capital gains or losses when the stock is sold.

Contributed Property

Property or assets given to a partnership or corporation by an owner or shareholder, often impacting the basis of the investment.

Shareholder

An individual or entity that owns shares in a corporation and therefore has ownership interest in the company.

Book Income

The income of a business reported in its financial statements, different from taxable income reported to the IRS.