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.

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Definitions:

Manufacturing Jobs

Positions in the production of goods within an industrial setting, often involving machinery and labor.

Foreign Trade

The exchange of goods, services, and capital between countries or territories, involving imports and exports.

Comparative Advantage

The capacity for a person, business, or nation to generate a product or service with a smaller opportunity cost compared to its rivals.

Competition

Rivalry among business firms for resources and customers.