The following graph shows Sparkle's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC) curve, marginal-cost (MC) curve, and profit-maximizing output and price. Indicate which of the labeled areas represent consumer surplus derived from the purchase of Sparkle toothpaste or deadweight loss relative to the efficient level of output. A B C D Consumer Surplus Deadweight Loss Suppose the government required Sparkle to produce the efficient level of output. Which of the following describes what would happen to the firm and Sparkle's customers? Sparkle would earn zero profit, and its customers would be just as well off as before. Sparkle would earn positive profit and increase production, boosting consumer surplus. Sparkle would earn negative profit, forcing it to shut down, and Sparkle's customers would gain no consumer surplus.
The following graph shows Sparkle's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC) curve, marginal-cost (MC) curve, and profit-maximizing output and price. Indicate which of the labeled areas represent consumer surplus derived from the purchase of Sparkle toothpaste or deadweight loss relative to the efficient level of output. A B C D Consumer Surplus Deadweight Loss Suppose the government required Sparkle to produce the efficient level of output. Which of the following describes what would happen to the firm and Sparkle's customers? Sparkle would earn zero profit, and its customers would be just as well off as before. Sparkle would earn positive profit and increase production, boosting consumer surplus. Sparkle would earn negative profit, forcing it to shut down, and Sparkle's customers would gain no consumer surplus.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The following graph shows Sparkle's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC ) curve, marginal-cost (MC) curve, and profit-maximizing output and price.
Indicate which of the labeled areas represent consumer surplus derived from the purchase of Sparkle toothpaste or deadweight loss relative to the efficient level of output.
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A
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B
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C
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D
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|---|---|---|---|---|---|
| Consumer Surplus |
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|
|
|
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| Deadweight Loss |
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Suppose the government required Sparkle to produce the efficient level of output.
Which of the following describes what would happen to the firm and Sparkle's customers?
Sparkle would earn zero profit, and its customers would be just as well off as before.
Sparkle would earn positive profit and increase production, boosting consumer surplus.
Sparkle would earn negative profit, forcing it to shut down, and Sparkle's customers would gain no consumer surplus.
Transcribed Image Text:Demand
A
ATC
MC
MR
Quantity of Sparkle Toothpaste
Price, Cost, Revenue
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