It Costs Suppliers $1 to Produce Each Additional Widget, and Widgets

question 133

Multiple Choice

It costs suppliers $1 to produce each additional widget, and widgets sell for $2. Some consumers are not willing to pay $2 for a widget but are nevertheless willing to pay more than $1. Which of the following statements is TRUE?

• A) The market is at equilibrium.
• B) Suppliers must be reaping big profits.
• C) There are unexploited gains from trade.
• D) Consumers will bid up prices.

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Definitions:

Issuance

The process of distributing or releasing something official, such as a document, stock, or currency.

Common Stock

Part of paid-in capital representing the basic ownership equity of the corporation. If the corporation has only one class of stock, it will be common stock.

Investors

Individuals or entities that allocate capital to various types of investments with the expectation of obtaining a future financial return.

Comparative Balance Sheet

Financial statement that presents the financial position of a company at different points in time, side-by-side, to enable comparative analysis.