The Diagram Below Shows the Demand and Supply Curves in a Perfectly

question 50

Multiple Choice

The diagram below shows the demand and supply curves in a perfectly competitive market. FIGURE 12-5
-Refer to Figure 12-5. If output in this market were Q₃, and the price were still P2, the loss in consumer surplus relative to the competitive equilibrium would be illustrated by area

• A) 3 + 4.
• B) 1.
• C) 3.
• D) 4.
• E) 2.

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Definitions:

Usury Law

Legal regulations that set maximum interest rates that can be charged on loans to protect consumers against excessively high rates.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, maintaining a balance without excess surplus or shortage.

Market Equilibrium

The state in which market supply equals market demand, leading to price stability.

Economic Profit

The financial gain obtained after subtracting both explicit and implicit costs from total revenue, reflecting the true profitability of a business.