A New Law Applied to a Competitive Market That Requires

question 5

Multiple Choice

A new law applied to a competitive market that requires that laid off workers be paid a large severance payment will

• A)not generate a deadweight loss.
• B)increase total welfare.
• C)increase consumer surplus in the market.
• D)decrease consumer surplus in the market.

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Definitions:

Shut Down

The process of ceasing operations, often temporarily, as a strategic or economic decision by a business.

Short Run

A period in economics where at least one input is fixed and cannot be changed.

Average Variable Costs

The total variable costs divided by the quantity of output produced. It represents the variable cost per unit of output.

Shutting-Down

The process a business undergoes when it ceases operations, often due to financial struggles or strategic decisions.