Multiple Choice
Which of the following statements is true regarding consumers and consumer surplus?
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5. Consumer and Producer Surplus; Price Ceilings and Floors
Consumer Surplus and Willingness to Pay
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In the context of the American free enterprise system, which force acts as a balance to the profit motive?
A
Consumer surplus
B
Competition
C
Willingness to pay
D
Government subsidies
Verified step by step guidance1
Understand the concept of the profit motive: In a free enterprise system, businesses are driven by the desire to maximize profits.
Identify the forces that can influence or limit the profit motive: These include consumer preferences, government intervention, and market competition.
Define competition: Competition occurs when multiple firms vie for the same customers, which tends to limit the ability of any one firm to set excessively high prices or reduce quality.
Explain how competition balances the profit motive: Because firms compete, they must keep prices reasonable and maintain quality to attract consumers, preventing monopolistic exploitation.
Conclude that among the given options, competition is the key force that acts as a balance to the profit motive in the American free enterprise system.
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