Scenario 10-1 The Demand Curve for Gasoline Slopes Downward and the Supply

question 122

Multiple Choice

Scenario 10-1
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000^th gallon of gasoline entails the following:
• a private cost of $3.10;
• a social cost of $3.55;
• a value to consumers of $3.70.
-Refer to Scenario 10-1. Let Q_MARKET represent the equilibrium quantity of gasoline, and let Q_OPTIMUM represent the socially optimal quantity of gasoline. Which of the following inequalities is correct?

• A)1,000 < Q_OPTIMUM < Q_MARKET
• B)Q_OPTIMUM < 1,000 < Q_MARKET
• C)Q_MARKET < 1,000 < Q_OPTIMUM
• D)Q_OPTIMUM < Q_MARKET < 1,000

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Definitions:

Demand Curve

A graph showing the relationship between the price of a product and the quantity of the product that consumers are willing to purchase.

Loanable Funds

The total resources or funds available for borrowing in the financial markets, encompassing both savings and any additional credit provided by banks.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

Uninsurable Risks

refers to risks that insurance companies are unwilling to cover due to their unpredictable or potentially catastrophic nature.