When Prices Fall Below Equilibrium

question 150

Multiple Choice

When prices fall below equilibrium

• A) producer surplus falls and consumer surplus falls.
• B) producer surplus falls and consumer surplus rises.
• C) producer surplus falls and it is uncertain what happens to consumer surplus.
• D) consumer surplus falls and it is uncertain what happens to producer surplus.

---

Definitions:

Mark-up

Elevating the base cost of merchandise to reimburse for overhead activities and profit.

Markdown

A reduction from the original price of an item to increase its attractiveness to buyers.

Overhead

The ongoing business expenses not directly attributed to creating a product or service.

Operating Profit

The profit earned from a firm's normal business operations, excluding deductions of taxes and interest.