If a Market Is Allowed to Move Freely to Its

question 85

Multiple Choice

If a market is allowed to move freely to its equilibrium price and quantity,then an increase in supply will

• A)increase consumer surplus.
• B)reduce consumer surplus.
• C)not affect consumer surplus.
• D)increase or decrease consumer surplus or leave consumer surplus unchanged.

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Definitions:

Human Capital

The abilities, learned knowledge, and lived experiences of a person or collective, regarded with respect to their financial value or expenditure to a business or state.

Physical Capital

Assets used by a business to produce goods and services, such as buildings, machinery, and equipment.

Diminishing Returns

A principle stating that as investment in a single area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.

Marginal Product

The additional output generated by employing one more unit of a particular input, holding all other inputs constant.