Refer to the Above Supply and Demand Graph for a Public

question 57

Multiple Choice

Refer to the above supply and demand graph for a public good. Which line segment would indicate the amount by which the marginal benefit of this public good exceeds the marginal cost at a certain quantity?

• A) de
• B) da
• C) ef
• D) ab

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product at which total demand for goods and services equals total supply, resulting in stable prices and employment.

Full Employment GDP

The maximum level of production an economy can sustain while keeping unemployment at its natural or non-accelerating inflation rate of unemployment (NAIRU).

Multiplier

In economics, a factor by which a change in spending results in an amplified change in national income and output.

Inflationary Gap

The difference between the actual output of an economy and the output it would produce without inflation, indicating an overheated economy.