Suppose That the Equilibrium Price in the Market for Widgets

question 126

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

• A)would necessarily increase even if the higher price resulted in a surplus of widgets.
• B)would necessarily decrease because the higher price would create a surplus of widgets.
• C)might increase or decrease.
• D)would be unaffected.

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Definitions:

Perceptual Tendency

The inclination to perceive or interpret information in a particular way, often influenced by past experiences and biases.

Proximity

Refers to being near or close to something or someone, often implying a relationship influenced by physical or emotional closeness.

Similarity

A principle in psychology that items that are similar in some aspect are more likely to be grouped together in the perceptual process.

Common Fate

A principle of Gestalt psychology where individuals tend to perceive elements as part of a group if they move together in the same direction.