Use the Following to Answer Questions

question 55

Multiple Choice

Use the following to answer questions:
Figure: Price and Quantity 1
-(Figure: Price and Quantity 1) In the diagram, at a price of $40, the quantity demanded is ______, the quantity supplied is ______, and there is a ______.

• A) 40; 60; surplus of 20 units
• B) 80; 20; shortage of 60 units
• C) 60; 40; shortage of 20 units
• D) 20; 60; surplus of 40 units

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Definitions:

Excess Profits

Profits that exceed what is considered normal or expected, often realized in favorable market conditions or through monopolistic practices.

Free Markets

An economic system in which prices are determined by unrestricted competition between privately owned businesses, without government intervention.

Efficiency

The optimal allocation of resources to produce the maximum amount of goods and services, with the least waste of resources.

Pareto Optimality

Pareto Optimality is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.