Indicate whether each of the following statements is true or false, and explain
ID: 1232671 • Letter: I
Question
Indicate whether each of the following statements is true or false, and explain why. If a statement is false or true, do not simply give a corrected statement -- you must provide a full explanation as to why that statement is correct or not.a. Consumer surplus is the difference between the minimum and maximum price a consumer is wiling to pay for a good.
b. Producer surplus is the difference between the actual price a producer receives for a product and the minimum price the producer would have been willing to accept for the product.
c. For Good A, supply elasticity is +2.5 and price elasticity of demand is -1.5. If an excise tax is imposed on Good A, sellers will pay the more of this tax than buyers.
d. A perfectly competitive firm can maximize its economic profit or minimize its losses only by adjusting its output.
e. If a perfectly competitive firm is producing output less than its profit-maximizing output, marginal revenue is greater than marginal cost.
Explanation / Answer
A.) False - Consumer surplus is the difference between the maximum the consumer is willing to pay for the good and the cost of the good. B.) True, that is the definition of producer surplus. C.) False - The consumers will pay more of the tax because the demand curve is more inelastic than the supply curve. D.) True - It cannot adjust prices because in perfect competition, prices are already at an optimal level. E.) True - A firm is at profit-maximizing output when marginal revenue is exactly equal to marginal cost.