Suppose an Increasing-Cost Competitive Industry Is in Equilibrium at a Price

question 43

Multiple Choice

Suppose an increasing-cost competitive industry is in equilibrium at a price of $100 and an output of 1,000 units.When a price ceiling of $80 is imposed the quantity traded in the market reduces to 800 units.Which of the following is true?

• A)Consumer surplus will increase and producer surplus will fall,but total surplus stays the same.
• B)Consumer surplus will fall and producer surplus will increase,keeping total surplus unchanged.
• C)Consumer surplus may or may not fall but producer surplus will fall.
• D)Consumer surplus will remain unchanged,but producer surplus and total surplus will fall.

---

Definitions:

Inductive Sequence

A logic sequence that builds from specific instances to a general conclusion, often used in reasoning or in creating narratives.

Supporting Details

Information or evidence provided in a text to explain, prove, or reinforce the main point or argument.

Good-News Message

A communication technique used in business writing or email to convey positive or favorable information to the recipient.

Subtle Sales Messages

Indirect or not immediately apparent marketing messages aimed at persuading consumers.