Welfare Economics Explains Which of the Following in the Market

question 5

Multiple Choice

Welfare economics explains which of the following in the market for televisions?

• A)The government sets the price of televisions;firms respond to the price by producing a specific level of output.
• B)The government sets the quantity of televisions;firms respond to the quantity by charging a specific price.
• C)The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers.
• D)The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

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Definitions:

Equivalent Variation

A monetary measure of the change in utility or satisfaction that a consumer experiences due to a change in prices, holding utility constant.

Consumption

The use of goods and services by households or individuals for personal satisfaction or need.

Utility Function

A mathematical representation of how a set of goods or services provide a level of satisfaction or utility to an individual or entity.

Compensating Variation

An economic concept representing the amount of money an individual would need to reach a level of utility as before an economic change.