If a Perfectly Competitive Market Is in Equilibrium and Market

question 5

Multiple Choice

If a perfectly competitive market is in equilibrium and market demand decreases,which of the following would happen?

• A)both producer and consumer surplus would increase
• B)both producer and consumer surplus would decrease
• C)producer surplus would decrease and consumer surplus would increase
• D)producer surplus would increase and consumer surplus would decrease
• E)producer and consumer surplus would remain unchanged

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Definitions:

Administrative

Relates to the daily operations and management tasks within an organization, including paperwork and office procedures.

Fixed Cost Element

A cost that does not vary with the level of production or sales, such as rent, salaries, and insurance expenses.

Mixed Cost

A cost that contains both fixed and variable components and changes with the level of activity, but not proportionately.

CVP Analysis

Cost-Volume-Profit (CVP) analysis is a managerial accounting technique used to determine the effects of changes in costs and volume on a company's profits.