The Graph Shown Demonstrates the Domestic Demand and Supply for a Good

question 137

Multiple Choice

The graph shown demonstrates the domestic demand and supply for a good, as well as the world price for that good. If this economy were to open to trade, domestic consumers would:

• A)enjoy a net gain of the surplus in areas B + C.
• B)suffer a net loss of the surplus in areas B + C + D.
• C)transfer the surplus in areas B + C to producers.
• D)lose the surplus in areas F + G to deadweight loss.

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Definitions:

Marginal Revenue

The additional income received from selling one more unit of a good or service.

Demand Curve

A graphical representation demonstrating the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Short Run

A period in economic analysis where some factors of production are fixed and cannot be changed.

Market Demand

The aggregate amount of a product or service that every consumer in a market is prepared and capable of buying at different price levels.