Consumer's Surplus

question 21

Multiple Choice

Consumer's surplus

• A)is the gap between total willingness to pay and the total market value of a good.
• B)guarantees that the market value of a good in money is equal to the total economic value of the good.
• C)is always negative because of diminishing marginal utility.
• D)is the total area under a consumer's demand curve.

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Definitions:

Risk Premium

The additional return expected by an investor for taking on a higher level of risk.

Nominal Interest Rate

The rate of interest before adjustment for inflation, representing the face value of interest payments.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing.

Interest Rate Components

The factors that determine the total interest rate charged by lenders, which can include the base rate, margin, fees, and other costs.