When the Price of a Product Exceeds the Marginal Cost

question 29

Multiple Choice

When the price of a product exceeds the marginal cost of producing it,producers have a

• A) consumer surplus.
• B) producer surplus.
• C) consumer shortage.
• D) producer shortage.
• E) deadweight surplus.

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Definitions:

Grapefruits

A large, round citrus fruit with a sour to semi-sweet flavor, commonly known for its beneficial nutrients and use in diets.

Giffen Good

A product that paradoxically experiences an increase in demand as its price increases, violating the basic law of demand, often due to the lack of close substitutes.

Inferior Good

A type of good for which demand decreases when consumer income rises, contrasting with normal goods, for which the opposite is observed.

Utility Function

A mathematical representation of how consumer preference over a set of goods and services translates into choices given constraints, like income.