Use the Following to Answer Questions

question 98

Multiple Choice

Use the following to answer questions:
Figure: International Trade 4
-(Figure: International Trade 4) Refer to the figure. If, in this figure, the government allowed free trade, consumer surplus would:

• A) increase by $118.
• B) increase by $31.50.
• C) decrease by $81.
• D) increase by $66.50.

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Definitions:

Revenue-Maximizing

The strategy of setting prices and production levels to achieve the highest possible revenue, not necessarily leading to the highest profit.

Inferior Good

A type of good for which demand decreases as the income of the consumer increases, opposite to normal goods.

Income Elasticity

A measure of how much the quantity demanded of a good responds to a change in consumers' income, holding all other factors constant.

Expenditures Decline

A situation where there is a reduction in spending by individuals, businesses, or governments.