Refer to the Graph Shown

question 107

Multiple Choice

Refer to the graph shown.If the price level is P₁, then:

• A)input prices will fall and output will rise in the long run.
• B)both input prices and output will fall in the long run.
• C)input prices will rise and output will fall in the long run.
• D)both input prices and output will rise in the long run.

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Definitions:

Consumer Surplus

The gap between the total sum consumers can and will pay for a good or service versus what they actually spend.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, measured above the supply curve.

Market Equilibrium

Market equilibrium occurs when the quantity demanded by consumers perfectly matches the quantity supplied by producers, resulting in no excess supply or demand within the market.

Price

The financial value forecasted, demanded, or handed over as compensation for an item.