Assume the Market Depicted in the Graph Is in Equilibrium

question 36

Multiple Choice

Assume the market depicted in the graph is in equilibrium at demand (D) and supply (S₁) . Total surplus is:

• A)greater than it is when the market is in equilibrium at D and S₂.
• B)less than it is when the market is in equilibrium at D and S₂.
• C)the same as it is when market is in equilibrium at D and S₂.
• D)zero.

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Definitions:

Tax

A compulsory financial charge imposed by a government on individuals or entities to fund various public expenditures.

Marginal Social Benefit

An additional gain to society derived from consuming or producing another unit of a good or service.

Marginal Social Cost

An increased charge to the general public for the creation of one more unit of a product or service.

Pollution

The presence in or introduction into the environment of a substance or thing that has harmful or poisonous effects.