ECON 2002 Final Exam

What does it mean when the products sold by the firms in an industry are homogeneous? A. Firms in the industry can produce the same product with different inputs B. all firms in the industry are identical in size C. the product sold by one firm is a perfect complement of the product sold by another firm in the same industry D. the product sold by one firm is a perfect substitute of the product sold by another firm in the same industry

D. the product sold by one firm is a perfect substitute of the product sold by another firm in the same industry

The law of demand states that... A. the quantity demanded is directly related to price B. people demand less at lower prices C. changes in the price and changes in the quantity demanded move in the same direction D. the quantity demanded is inversely related to price

D. the quantity demanded is inversely related to price

Economic profit can be calculated by... A. total revenue - explicit costs B. total revenue - implicit costs C. total revenue - foxed costs D. total revenue - explicit costs - implicit costs

D. total revenue- explicit costs- implicit costs

A monopolist has 4 distinct groups of customers. Group A has an elasticity demand of 0.2, B has an elasticity demand of 0.8, C has elasticity demand of 1.0, and D has an elasticity demand of 2.0. The group paying the highest price for the product will be...

A

When output is 100 units, the firm's total fixed cost is $500. What will the firm's total fixed cost be if output doubles to 200 units? A. $500 B. $250 C. $1,000 D. can't tell from the information provided

A. $500

Suppose that when the price of milk rises 20%, the quantity demanded of milk falls 10%. Based on this information, what is the approximate absolute price elasticity of demand of milk? A. 0.5 B. 0.05 C. 0.2 D. 2.0

A. 0.5

Color television prices rise by 10%, and in response the quantity of those TVs supplied increases by 6%. The supply elasticity for color television sets in that price range is... A. 0.6 B. -1.66 C. 6.0 D. 1.66

A. 0.6

A certain athlete loves donuts. He receives 100 units of utility for the first donut, an additional 80 for the second, and an additional 60 for the third, another 40 for the fourth, and another 20 for the fifth. The marginal utility of the fourth donut is _______ and the total utility from consuming four donuts is _______. A. 40; 280 B. 280; 100 C. 40; 40 D. 140; 280

A. 40; 280

Suppose that the consumer decreases and that hamburger is an inferior good. Which of the following will occur in the market for hamburgers? A. Market clearing price will rise, and equilibrium quantity will rise B. Market clearing price will fall, and equilibrium quantity will rise C. Market clearing price will rise, and equilibrium quantity will fall D. Market clearing price will fall, and equilibrium quantity will fall

A. Market clearing price will rise, and equilibrium quantity will rise

One effect of a minimum wage in the market for low-skilled labor is... A. a surplus of low skilled labor B. a shortage of low skilled labor C. an increase in demand for low skilled labor D. no effect in the market for low skilled labor

A. a surplus of low skilled labor

For a perfect competitor, price equals... A. both average revenue and marginal revenue B. marginal revenue only C. neither marginal revenue nor average revenue D. average revenue only

A. both average revenue and marginal revenue

A increase in output would result in no change in long-run average costs when there are... A. constant returns to scale B. diminishing marginal product C. diseconomies to scale D. economies of scale

A. constant returns to scale

What is true of the price elasticity of demand faced by a monopoly firm? A. demand becomes more elastic as the range of imperfect substitutes expand B. demand is perfectly elastic because the monopolist has no competition C. demand is inelastic D. demand is more elastic at lower prices and more inelastic at higher prices

A. demand becomes more elastic as the range of imperfect substitutes expand

An increase in total revenue will result if... A. demand is elastic and price decreases B. demand is elastic and price increases C. demand is inelastic and price decreases D. demand is inelastic and price increases

A. demand is elastic and price decreases

Due to extremely large fixed costs, an electricity generating plant probably experiences which of the following returns to size? A. economies of scale B. diminishing marginal product C. diseconomies of scale D. constant returns to scale

A. economies of scale

Suppose a form doubles its output in the long run. At the same time the unit cost of production remains unchanged. We can conclude that the firm is... A. facing constant returns to scale B. exploiting the economies of scale available to it C. facing diseconomies of scale D. not using the available technology efficiently

A. facing constant returns to scale

Economies can be described as the study of how people use _______ resources to satisfy _______ wants. A. limited; unlimited B. limited; limited C. unlimited; limited D. unlimited; unlimited

A. limited; unlimited

Holding supply constant, a reduction in demand leads to... A. lower prices and lower quantity supplied B. higher prices and higher quantity supplied C. lower prices and higher quantity supplied D. higher prices and lower quantity supplied

A. lower prices and lower quantity supplied

When marginal product is rising... A. marginal cost is falling B. average fixed cost is rising C. total product s falling D. marginal cost is rising

A. marginal cost is falling

The contribution to total revenues coming from the next worker hired is... A. marginal revenue product B. total product C. marginal product D. total revenues

A. marginal revenue product

Diseconomies of scale occur... A. only in the long run B. because of fixed costs C. only in the short run D. none of the above

A. only in the long run

The price elasticity of demand can be computed as... A. percentage change in quantity demanded/percentage change in price B. change in price/ change in quantity demanded C. change in quantity demanded/ change in price D. change in total utility/ change in quantity

A. percentage change in quantity demanded/percentage change in price

If total utility is increasing, then marginal utility is... A. positive B. negative C. decreasing D. zero

A. positive

For a firm in a perfectly competitive industry, A. short-run economic profits may be positive, but long-run profits must be zero B. short-run and long-run economic profits must be zero C. short- run profits must be zero D. both short-run and long-run economic profits may be negative

A. short-run economic profits may be positive, but long-run profits must be zero

One result of the agriculture price supports cited in the text is that... A. sometimes surplus food is given away B. food shortages result in most cases C. small farms receive most of the benefits D. none of the above

A. sometimes surplus food is given away

In economies, the planning horizon is defined as... A. the long run, during which all inputs are variable B. the period of time for which technology is fixed C. the longest time period over which the firm can make decisions D. 10 years for every firm

A. the long run, during which all inputs are variable

If the marginal productivity of labor decreases, then... A. the quantity of labor demanded at every possible wage rate will be less B. the quantity of labor demanded will not be affected C. the quantity of labor demanded at every possible wage rate will be higher D. the demand curve for labor will shift upward and to the right

A. the quantity of labor demanded at every possible wage rate will be less

The price elasticity of demand is a measure of... A. the responsiveness of the quantity demanded of a good to changes in the price of a good B. the horizontal shift in the demand curve when the price of a good changes C. the quantity demanded of a good at a given price D. the demand for a product holding price constant

A. the responsiveness of the quantity demanded of a good to changes in the price of a good

Accounting profit can be calculated as... A. total revenue - explicit costs B. total revenue - implicit costs C. total revenue - foxed costs D. total revenue - explicit costs - implicit costs

A. total revenue- explicit costs

If both buyers and sellers expect the price of a commodity to rise in the future, it is likely that the market clearing price _____ and the equilibrium quantity ______. A. will rise; cannot be predicted B. cannot be predicted; will rise C. cannot be predicted; will fall D. will fall; cannot be predicted

A. will rise; cannot be predicted

Which of the following statements is correct? A. When marginal product is greater than average physical product, total product is increasing at a decreasing rate B. When Marginal Product is greater than Average Physical Product, Average Physical Product is increasing C. When Marginal Product is greater than Average Physical Product, Average Physical Product is decreasing D. When Marginal Product is greater than Average Physical Product, Average Physical Product is equal to total product

B. When Marginal Product is greater than Average Physical Product, Average Physical Product is increasing

Any improvement in overall production technology that permits more output to be produced with the same level of inputs causes... A. a movement up the supply curve resulting in both higher equilibrium price and quantity B. a rightward shift of the supply curve so that more is offered at each price C. a leftward shift of the supply curve so that less is offered for sale at each price D. no movement of the supply curve, but a fall in price and decrease in quantity supplied

B. a rightward shift of the supply curve so that more is offered at each price

Which of the following is TRUE about the long run? A. at least one resource is fixed B. all resources are variable C. all resources are fixed D. none the above

B. all resources are variable

If demand increases while supply decreases, then the equilibrium price... A. may increase, decrease, or stay the same B. always increases C. never changes D. always decreases

B. always increases

If the price of Pepsi increases, then there will be ______ of Pepsi. A. a decrease in the quantity supplied B. an increase in the quantity supplied C. an increase in the supply D. a decrease in the supply

B. an increase in the quantity supplied

Other things being equal, a higher price induces... A. buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell B. buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell C. buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell D. buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell

B. buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC=$7; AVC=$5; MC=$6.50; MR=$6.50. The firm should... A. increase output B. continue to produce its current output C. decrease output D. shut down

B. continue to produce its current output

Average total cost for an information product would... A. increase constantly as quantity increases B. decrease constantly as quantity increases C. remain constant as quantity increases D. first decrease and then increase as quantity increases

B. decrease constantly as quantity increases

The demand curve for a perfectly competitive industry is... A. horizontal B. downward sloping C. vertical D. indeterminate without more information

B. downward sloping

Suppose the market price is $5, marginal cost is $4, and average total cost is $2. The perfectly competitive firm in that market is... A. earning $1 in economic profits per unit of output and is not maximizing profits B. earning $3 in economic profits per unit of output and is not maximizing profits C. earning $2 in economic profits per unit of output and is maximizing profits D. none of the above: insufficient information is given

B. earning $3 in economic profits per unit of output and is not maximizing profits

A monopolistic competitor is in long-run equilibrium when... A. economic profits are equal to zero and the marginal cost curve is tangent to the demand curve B. economic profits are equal to zero and the average total cost curve is tangent to the demand curve C. economic profits are greater than zero and the average total cost curve is tangent to the demand curve D. economic profits are greater than zero and the marginal cost curve is tangent to the demand curve

B. economic profits are equal to zero and the average total cost curve is tangent to the demand curve

A firm in a perfectly competitive industry faces the following cost and revenie conditions: ATC=$6; AVC=$3; MR=MC=5. The firm is... A. in a position in which it should shut down B. experiencing economic losses C. earning economic profits D. earning zero profits

B. experiencing economic losses

The more sensitive people are to a change in price, the... A. closer the price elasticity of demand is to one B. greater the price elasticity of demand C. smaller the price elasticity of demand D. greater a change in price must be to induce a certain change in quantity demanded

B. greater is the price elasticity of demand

If the absolute price elasticity of demand for concert tickets is 0.75, an increase in ticket price will... A. not change total revenue B. increase total revenue C. not change the elasticity of demand D. decrease total revenue

B. increase total revenue

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is... A. price differentiation B. price discrimination C. price demarcation D. price deliniation

B. price discrimination

A firm in a perfectly competitive industry is a... A. quality maker B. price taker C. price maker D. quantity taker

B. price taker

The demand curve for the product of a monopolistically competitive firm slopes downward because... A. products are homogeneous B. products are perceived by customers as different C. people only care about price when they buy a good D. the firm's goal is to maximize profits

B. products are perceived by customers as different

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm... A. changes its price, the quantity demanded will change in the opposite direction B. raises its price, sales will fall to zero C. accepts the market set price, the number of units the firm can sell is limited D. lowers its price, it can sell more

B. raises its price, sales will fall to zero

The main advantage of a corporate form of organization is that... A. shareholders have unlimited liability B. shareholders have limited liability C. shareholders are not subject to double taxation D. all corporate profits must be distributed as dividends

B. shareholders have limited liability

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. What has occurred? A. demand increased B. supply decreased C. supply increased D. demand decreased

B. supply decreased

The total gains from trade within a price system is... A. the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price B. the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price C. the area beneath the market demand curve and above the market clearing price minus the area above the market supply curve and beneath the market clearing price D. always equal to zero

B. the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price

A monopolist's demand curve is... A. perfectly elastic B. the industry demand curve C. perfectly inelastic D. of unit elasticity throughout

B. the industry demand curve

Sugar is an input used to produce cereal. Suppose that the price of sugar rises. As a result, A. the supply curve for cereal will shift to the right B the supply curve for cereal will shift to the left C. the supply curve for sugar will shift to the left D. the supply curve for sugar will shift to the right

B. the supply curve for cereal will shift to the left

Firms in a monopolistically competitive market will advertise because... A. the elasticity for their product is inelastic B. they want to differentiate their product C. of the significant differences in their product over their competitors D. they want to increase the elasticity of the demand curve

B. they want to differentiate their products

A firm that shuts down in the short run experiences losses equal to its... A. total variable costs minus its total fixed costs B. total fixed costs C. total variable costs D. average variable costs

B. total fixed costs

If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal... A. the rate of output where marginal revenue equals average fixed costs B. zero C. the rate of output associated with the breakeven point D. the rate of output where price quals marginal costs

B. zero

The relative price of a good is that a price... A. that is equal to the equilibrium price B. expressed in constant 2012 dollars C. expressed in terms of the price of another good D. expressed in today's dollars

C. expressed in terms of the price of another good

In economic terminology, a normal good is a good... A. on which a monetary value cannot be placed B. for which demand increases when price increases C. for which demand increases when income increases D. that is liked only by normal people

C. for which demand increases when income increases

In order to be effective, a price floor... A. must be set below equilibrium price B. must be set above equilibrium price C. must be set at equilibrium price D. must be a zero price

C. must be set above equilibrium price

When total product is increasing at a decreasing rate, marginal product is... A. positive and increasing B. constant C. positive and decreasing D. negative

C. positive and decreasing

Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should... A. sell the newsletters on the inelastic portion of the demand curve B. increase the price of the newsletters C. reduce the price of the newsletters D. keep the price the same

C. reduce the price of newspapers

A monopoly misallocates resources when it... A. sells the same product to different groups of customers at different prices B. exploits scale economies C. restricts output so that the marginal benefit of the last unit sold exceed the marginal social cost of producing the good D. makes an above normal profit

C. restricts output so that the marginal benefit of the last unit sold exceed the marginal social cost of producing the good

In a monopoly, A. the market is small in an absolute sense B. the monopolist determines how much each firm will produce C. the firm and the industry are the same thing D. the firm is large in an absolute sense

C. the firm and the industry are the same thing

Implicit costs are... A. costs that are taken into consideration by accountants B. costs that are variable in the short run and fixed in the long run C. the opportunity costs of using factors that a producer does not buy or hire but already owns D. the costs of using factors that a producer hires or rents

C. the opportunity costs of using factors that a producer does not buy or hire but already owns

The only variable that can affect a movement along the demand curve is... A. income levels B. the number of buyers C. the price of the good itself D. the number of substitutes

C. the price of the good itself

A firm earning economic losses should operate int he short run as long as... A. the price per unit sold is greater than the average fixed cost per unit produced B. marginal revenue is at least the price per unit sold C. the price per unit sold is greater than the average variable cost per unit produced D. the price per unit is equal to or greater than the marginal cost of production

C. the price per unit sold is greater than the average variable cost per unit produced

In a perfectly competitive market in which all firms are maximizing their economic profits, the demand and supply curves intersect at a price of $8. From this we know that each... A. firm's average total cost of producing the good is $8 B firm's earning positive economic profits at a price of $8 or more C. firm's average variable cost of producing the good is $8 D. firm's marginal costs of producing the good is $8

D. firm's marginal costs of producing the good is $8

When prices are used as rationing device, goods that are relatively more scarce than they used to be will have... A. lower excess demands B. long queues C. greater demand D. higher prices

D. higher prices

The short-run breakeven price... A. occurs at the output at which the firm yields a positive economic profit B. is the price at which the firm's current liabilities are paid off C. occurs at the output at which the firm yields a below normal rate of return D. is the price at which a firm's total revenues equal total costs

D. is the price at which a firm's total revenues equal total costs

In a perfectly competitive market, a firm;s short-run supply curve... A. its total cost curve between the shutdown point and the break even point B. its average variable cost curve below the point of intersection with its total cost curve C. its total cost curve D. its marginal cost curve equal to or above the point of intersection with its average variable cost curve

D. its marginal cost curve equal to or above the point of intersection with its average variable cost curve

A firm seeking to maximize economic profits should produce at the output at which... A. marginal revenue equals average revenue B. average revenue equals average cost C. total revenue equals total cost D. marginal revenue equals marginal cost

D. marginal revenue equals marginal cost

A price floor set below the equilibrium price will cause which of the following? A. a shortage B. a surplus C. an increase in demand D. none of the above

D. none of the above

An individual would willingly give a concerts for $2,000. If she is paid $5,000 for the concert, she is... A. certainly being paid more than warranted by the level of demand B. not being paid her full opportunity cost C. receiving $3,000 to cover her opportunity cost D. receiving $3,000 of economic rent

D. receiving $3,000 of economic rent

When El Torito Restaurant is deciding how many waiter to hire for a holiday weekend, it is making a ______ decision. A. fixed input B. plant size C. long run D. short run

D. short-run

To calculate marginal utility, divide the change in total utility by... A. the price of the product B. the consumer's subjective level of preference C. the number of units consumed D. the change in the number of units consumed

D. the change in the number of units consumed

If a firm is a perfect competitor, then... A. it can independently set the price of the product it sells without regard to what other firms in the market are doing B. its marginal cost will exceed marginal revenue at the optimal level of output C. it is impossible for the firm to earn short run economic profits D. the demand curve for its product is perfectly elastic

D. the demand curve for its product is perfectly elastic

Price ceilings are adopted in most cases because... A. the government favors a non-intervention policy B. the government wants to create surpluses C. producers need incentives to produce more of the good or service D. the government views the current equilibrium price as too high for consumers

D. the government views the current equilibrium price as too high for consumers

Typically, an individual takes only one newspaper form the bin because... A. marginal utility increases with the first consumption of newspapers B. there are limited amounts of newspapers in the bin C. total utility will rise with consumption of more than one newspaper D. the low marginal utility of additional newspapers

D. the low marginal utility of additional newspapers

A monopolist produces in the elastic segment of its demand curve because when it lowers the price, A. the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue decreases B. the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue increases C. the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue decreases D. the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases

D. the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases

Which of the following will tend to occur when a surplus exists in a market? A. the price will tend to rise over time B. supply will decrease and demand will increase until the surplus disappears C. supply will increase and demand will decrease until the surplus disappears D. the price will tend to decrease over time

D. the price will tend to decrease over time

Corrina was working as a waitress is an Italian restaurant making an annual income of $25,000 per year when she decoded to start up her own catering business. Corrina used $10,000 of her savings that was earning 5 percent annual interest to establish her business. After the first year she made an accounting profit of $20,000. Her economic profit was... A. -$5,000 B. -$5,550 C. $20,000 D. $25,000

B. - $5,550

Suppose that the price of eggs increases from 75 cents to $1.00 per dozen and as a result a typical farmer experiences a decrease in egg sales from 300 to 200 dozen per week. Using the arc method the absolute price elasticity of demand is... A. 3.0 B. 1.4 C. 0.8 D. 1.75

B. 1.4

An absolute price elasticity of demand equal to 0.4 indicates that a... A. 1 percent increase leads to a 4 percent decrease in quantity demanded B. 10 percent decrease in price leads to a 4 percent increase in quantity demanded C. 4 percent increase in price leads to a 10 percent decrease in quantity demanded D. 0.4 percent decrease in price leads to a 1 percent increase in quantity demanded

B. 10 percent decrease in price leads to a 4 percent increase in quantity demanded

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the marginal product of the 2nd worker? A. 35 cookies B. 20 cookies C. 15 cookies D. 30 cookies

B. 20 cookies

The loss-minimizing output for the perfectly competitive firm occurs at the point at which... A. TR - MR = minimum B. MR = MC C. TC - ATC = maximum D. TR - TC = maximum

B. MR=MC

What is the equation for total cost? A. TC = TFC * TVC B. TC = TFC + TVC C. TC = TFC / TVC D. TC = TFC - TVC

B. TC= TFC + TVC

A payment for the use of any resource over and above its opportunity cost is called... A. economic profit B. normal cost C. economic rent D. accounting profit

C. economic rent

Six months ago, the price of gasoline was $2.20 per gallon.Now, the price is $2.40 per gallon. In response to this price increase, the number of gallons of gasoline purchased has declined by 2 percent. Based on this information, what is the absolute price elasticity of demand for gasoline? A. 4.35 B. 0.10 C. 0.23 D. 1.20

C. 0.23

Suppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris Paribus, which on of the following statements best explains this situation? A. the demand for Florida oranges fell because of the freeze , and this led to a higher demand for California oranges B. the supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price C. The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase D. The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price

C. The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase

A minimum wage is an example of... A. black market B. price ceiling C. price floor D. market clearing price

C. a price floor

When the government sets a price floor which is above the equilibrium price, A. the equilibrium price will be maintained B. a price ceiling will follow C. a surplus will develop D. a shortage will develop

C. a surplus will develop

The price of labor in the agricultural industry has just increased. For agricultural products, this will lead to... A. a decrease in price and an increase in quantity B. an increase in price and an increases in quantity C. an increase in price and a decrease in quantity D. a decrease in price and a decrease in quantity

C. an increase in price and decrease in quantity

Which of the following is a characteristic of perfect competition? A. differentiated products B. few firms C. easy entry and exit D. none of the above

C. easy entry and exit

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per worker and fixed costs equal $60, what is the total cost of those 4 units of output? A. $84 B. $60 C. $70 D. $ 120

D. $120

If the price elasticity of supply of television stes its constant and equal to 3, a 10 percent increase in prce will result in a change in quantity supplied equal to... A. 3 1/3 percent B. -30 percent C. 1/3 percent D. 30 percent

D. 30 percent

Suppose that 20,000 tickets were sold at $120 for an NBA game at Madison Square Garden in New York. The game was sold out and some fans could not get tickets. This suggests that... A. the game was advertised too heavily B. selling price was above equilibrium price C. selling price was at equilibrium D. selling price was below equilibrium price

D. Selling price was below equilibrium price

Suppose that demand for tablets increases, and simultaneously, the supply of tablets increases. Which of the following would you conclude definitely will occur in the market for tablets? A. the market clearing price will rise B. the market clearing price will fall C. the equilibrium quantity will fall D. the equilibrium quantity will rise

D. The equilibrium quantity will rise

Which of the following are barriers to entry? A. patents and copyrights B. control of resources C. economies of scale D. all of the above

D. all of the above

Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause... A. a leftward shift in the demand for coffee B. a leftward shift in the demand curve for tea C. a decrease in the demand for coffee D. an increase in the demand for coffee

D. an increase in the demand for coffee

Total consumer surplus in a market is measured as the... A. area bounded below the market clearing price and above the market supply curve B. vertical distance form the horizontal (quantity) axis to the market clearing price C. horizontal distance from the vertical (price) axis to the equilibrium quantity D. area bounded above the market clearing price and beneath the market demand curve

D. area bounded above the market clearing price and beneath the market demand curve