Suppose That the Equilibrium Price in the Market for Widgets

question 126

Multiple Choice

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

• A)would necessarily increase even if the higher price resulted in a surplus of widgets.
• B)would necessarily decrease because the higher price would create a surplus of widgets.
• C)might increase or decrease.
• D)would be unaffected.

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Definitions:

Posterior Probability

is the probability of the hypotheses given the observed data, calculated using Bayes' theorem.

Prior Probability

The likelihood of an event occurring before new evidence is taken into account.

Conditional Probability

The estimated probability of an event's occurrence when it is already known that another event has preceded it.

Thomas Bayes

An 18th-century British statistician and clergyman known for formulating the Bayes' Theorem, which describes the probability of an event based on prior knowledge.