Figure 8-1 ​

question 22

Multiple Choice

Figure 8-1
​
-Based on the scatter diagram in Figure 8-1, if real disposable income is $800 billion, the consumption spending would be approximately

• A)$800 billion.
• B)$650 billion.
• C)$540 billion.
• D)$420 billion.

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Definitions:

Excess Capacity

A scenario where a firm or industry has unused production resources, leading to inefficiencies and lowered profitability.

Productive Inefficiency

A situation where resources are not used in the most cost-effective way, resulting in a higher production cost than necessary.

Allocative Inefficiency

A situation where resources are not allocated efficiently, leading to a mismatch between what is produced and what consumers actually demand, causing wastage and loss of potential welfare.

Monopolistically Competitive

Refers to a market structure where many firms sell products or services that are similar but not perfect substitutes, with some ability to set prices.