Assuming the Market Is in Equilibrium in the Graph Shown

question 90

Multiple Choice

Assuming the market is in equilibrium in the graph shown with demand D and supply S₁, total surplus is:

• A) greater than total surplus when market is in equilibrium at D and S₂.
• B) less than total surplus when market is in equilibrium at D and S₂.
• C) the same as total surplus when market is in equilibrium at D and S₂.
• D) zero.

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Definitions:

Treasury Bill

A short-term government security issued at a discount from the face value and yielding the face value upon maturity.

Market Rate

The prevailing interest rate available in the marketplace for securities or loans, dictated by supply and demand forces.

Simple Interest

Interest earned or paid only on the original principal amount invested or loaned.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, usually large corporations.