Multiple Choice
The demand curve for Nickelback's new album is downward sloping. At a price of \$2, nationwide demand is 100 albums. If the price rises to \$3, what happens to consumer surplus?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
Multiple Choice
Which of the following is an example of a positive incentive for consumers?
A
A company limits the quantity of items a customer can buy.
B
A store offers a discount on all products.
C
A government imposes a tax on purchases.
D
A retailer increases the price of its goods.
Verified step by step guidance1
Understand the concept of a positive incentive: it is a reward or benefit that encourages consumers to take a particular action, such as buying more or choosing a specific product.
Analyze each option to determine if it encourages consumer behavior positively (reward) or discourages it (penalty or restriction).
Option 1: 'A company limits the quantity of items a customer can buy' is a restriction, which discourages buying more, so it is not a positive incentive.
Option 2: 'A store offers a discount on all products' reduces the price consumers pay, which encourages more purchases, making it a positive incentive.
Option 3 and 4 involve taxes or price increases, which raise costs and discourage buying, so they are negative incentives rather than positive ones.
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