Multiple Choice
Which of the following circumstances would most likely increase the bargaining power of buyers in a market?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Which of the following is the main incentive for a manufacturer to sell a product?
A
To receive payment greater than the cost of production
B
To ensure all consumers pay their willingness to pay
C
To maximize consumer surplus
D
To minimize the market price
Verified step by step guidance1
Understand the concept of incentives in microeconomics: Incentives are factors that motivate economic agents, such as manufacturers, to take certain actions.
Recall that manufacturers aim to maximize their profits, which is the difference between total revenue and total cost of production.
Recognize that the main incentive for a manufacturer to sell a product is to receive payment that exceeds the cost of producing that product, ensuring profitability.
Evaluate the other options: ensuring all consumers pay their willingness to pay relates to price discrimination, maximizing consumer surplus benefits consumers, and minimizing market price is generally not an incentive for producers as it can reduce profits.
Conclude that the correct incentive aligns with the goal of profit maximization, which is to receive payment greater than the cost of production.
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