Suppose the demand curve is given by P=20-Q. Suppose the supply curve is such that the market price if $10. Now suppose that in order for the product to be produced, the government needs to pay $40 as a one time payment (imagine the government needs to build a road for example). Which statement is correct? Question 6 options: All other answers are incorrect The government should build the road because consumer surplus > construction costs The government should build the road because consumer surplus > construction costs, but only after verifying there are no other uses for the money that will generate even better surplus. The government should not build the road
Suppose the demand curve is given by P=20-Q. Suppose the supply curve is such that the market price if $10. Now suppose that in order for the product to be produced, the government needs to pay $40 as a one time payment (imagine the government needs to build a road for example). Which statement is correct? Question 6 options: All other answers are incorrect The government should build the road because consumer surplus > construction costs The government should build the road because consumer surplus > construction costs, but only after verifying there are no other uses for the money that will generate even better surplus. The government should not build the road
Chapter4: Markets In Action
Section: Chapter Questions
Problem 19SQ
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Question
Suppose the
Question 6 options:
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All other answers are incorrect |
|
The government should build the road because consumer surplus > construction costs |
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The government should build the road because consumer surplus > construction costs, but only after verifying there are no other uses for the money that will generate even better surplus. |
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The government should not build the road |
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