When Prices Drop in Response to a Decline in Demand

question 9

Multiple Choice

When prices drop in response to a decline in demand for an increasing cost industry

• A)producer surplus will increase but rents may decrease.
• B)rent earned by elastically supplied inputs will decline by more than rent earned by inelastically supplied inputs.
• C)rent earned by elastically supplied inputs will decline by less than rent earned by inelastically supplied inputs.
• D)both producer surplus and rents will increase.

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Definitions:

Debts

Money owed by one party to another, which is to be repaid according to terms agreed upon by both parties.

Revenue Account

An account that records the income generated from the sale of goods and services.

Debit Balance

An account balance where total debits exceed total credits.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account, used in double-entry bookkeeping.