FIGURE 5-5 -Refer to Figure 5-5.At the Market-Clearing Price and Quantity of Quantity

question 119

Multiple Choice

FIGURE 5-5
-Refer to Figure 5-5.At the market-clearing price and quantity of $30 per hour and 4000 hours of gardening services purchased,the economic surplus is

• A)the sum of the areas below the demand curve,but above the market-clearing price of $30 - i.e.,areas 1,2,6.
• B)the sum of the areas below the demand curve - i.e.,areas 1,2,3,4,5,6,7,8,9.
• C)the sum of the areas above the supply curve,but below the market-clearing price of $30 - i.e.,areas 3,4,7.
• D)the sum of the areas above the supply curve and below the demand curve - i.e.,areas 1,2,3,4,6,7.
• E)the sum of the areas below the demand curve,up to 4000 hours - i.e.,areas 1,2,3,4,5,6,7,8.

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Definitions:

Selling Expenses

Costs incurred directly and indirectly from selling a product or service, including advertising, sales salaries, and commission expenses.

Accounts Payable

An accounting term for the amount of money a company owes to its suppliers or creditors for goods or services received but not yet paid for.

Accounts Receivable

Funds that customers owe to a business for products or services already received but not yet compensated for.

Cash Collections

The process of managing and collecting payments from customers for goods or services provided, crucial for maintaining a company’s liquidity.