FIGURE 5-7 -Refer to Figure 5-7.The Market for Good X Is in Is

question 13

Multiple Choice

FIGURE 5-7
-Refer to Figure 5-7.The market for good X is in equilibrium at P₀ and Q₀.Now suppose the government imposes a ________ at P₂.One result would be ________.

• A)price floor; an increase in economic surplus represented by area 1
• B)price floor; a deadweight loss represented by areas 5 and 6
• C)price ceiling; an increase in economic surplus represented by areas 2 and 5
• D)price floor; a deadweight loss represented by area 8
• E)price ceiling; a deadweight loss represented by areas 5 and 6

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Definitions:

Trade Surplus

A situation where the value of a country's exports exceeds the value of its imports over a given period.

Goods

Physical items that satisfy human wants or needs, which can be transferred from one person to another and include both consumer and capital goods.

Services

Intangible products provided to consumers, such as healthcare, education, and financial advising, which do not result in the ownership of anything physical.

Financial Account

A component of a country's balance of payments that records transactions of financial assets between residents and non-residents.