If AE = 50 + 0

question 1

Multiple Choice

If AE = 50 + 0.6Y and Y = 200, then unplanned inventories

• A)increase by 75.
• B)increase by 30.
• C)decrease by 75.
• D)decrease by 30.
• E)do not change and equilibrium exists.

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Definitions:

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable.

Marginal Cost

The boost in comprehensive expenditure that comes from the generation of one more unit of a product or service.

Socially Efficient

A situation in which an allocation of resources maximizes total social welfare, taking into account both the benefits and costs to society as a whole.

Marginal Costs

The increase in cost due to the production of an extra unit of a product or service.