Assume the Market Depicted in the Graph Is in Equilibrium

question 106

Multiple Choice

Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:

• A) consumer surplus will rise by $6,750.
• B) producer surplus will fall by $4,500.
• C) total surplus will rise by $2,250.
• D) total surplus will fall by $2,250.

---

Definitions:

Continuous Compounding

The process of calculating interest on an investment or loan continuously, leading to the accumulation of interest upon interest, often resulting in higher yields.

Stated Annual Percentage Rate

The nominal interest rate stated by financial institutions, not accounting for compounding or fees, on products like loans or savings accounts.

Daily Compounding

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a daily basis.

EAR

Effective Annual Rate; the real return on an investment, taking into account the effect of compounding interest.