Suppose That Last Year the Equilibrium Price and the Quantity

question 77

Multiple Choice

Suppose that last year the equilibrium price and the quantity of good X were $10 and 5 million pounds, respectively. Because of strong demand this year, the equilibrium price and the quantity of good X are $12 and 7 million pounds, respectively. Assuming that the supply curve of good X is linear, producer surplus:

• A) decreased from $8 million to $6 million.
• B) increased from $12.5 million to $24.5 million.
• C) increased from $3 million to $7 million.
• D) increased from $4.2 million to $5.6 million.

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Definitions:

Marketable Securities

Financial instruments that can be easily converted into cash at a reasonable price in the short term.

Money Market

A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.

Interest Rate Risk

The potential for investment losses due to changes in interest rates.