As the Market Price of a Good Falls Due to a Decrease

question 115

Multiple Choice

As the market price of a good falls due to a decrease in demand, what happens to producer surplus?

• A) It does not change.
• B) It rises.
• C) It falls.
• D) It can fall, rise, or stay the same.

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Definitions:

Accounting Profit

The difference between total revenue and explicit costs, indicating the financial gain recorded in the books of accounts.

Entrepreneurial Talent

The unique set of skills, creativity, innovation, and risk-taking abilities that entrepreneurs possess to start and manage businesses.

Implicit Costs

Non-out-of-pocket costs, often opportunity costs, that represent the lost opportunity to use resources in an alternative way.

Short Run

The period of time during which at least one input, such as plant size, is fixed and cannot be changed.