Suppose an Economy's Consumption Schedule Shifts from C₁ to C

question 141

Multiple Choice

Suppose an economy's consumption schedule shifts from C₁ to C ₂ as shown in the diagram below.We can say that its:

• A) MPC has increased but its APC at each income level is unchanged.
• B) APC at each income level is increased but its MPC is unchanged.
• C) MPC and APC at each income level have both increased.
• D) MPC and APC at each income level have both decreased.

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Definitions:

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often depicted as an area on a graph.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that suppliers are willing to sell.

Producer Surplus

The difference between the amount producers are willing and able to sell a good for and the amount they actually receive.

Market Price

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand conditions.