A Significant Decrease in the Price of a Variable Input

question 56

Multiple Choice

A significant decrease in the price of a variable input causes the:

• A)marginal,average,and total cost curves to shift downward.
• B)average total cost curve to shift downward,causing a fall in output.
• C)average variable cost curve to shift downward while leaving the output level unchanged.
• D)marginal cost curve to shift downward.

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Definitions:

Total Surplus

The combined benefit that both consumers and producers receive from a transaction, comprising consumer and producer surplus.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e., the market price).

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often reflecting gains from trade.

Tariff Revenue

Income generated by a government from imposing tariffs on imported goods.