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Question

In the standard adjoining diagram, the measure of consumer surplus is

                                                              
 

The correct answer is
AB

The concept of consumer surplus is integral to understanding consumer behavior in economics. It represents the difference between what consumers are willing to pay for a good or service and what they actually pay. Graphically, consumer surplus is the area between the demand curve and the price level, up to the quantity consumed.

In the given diagram, let us analyze and identify the area representing consumer surplus:

  1. The demand curve is typically downward sloping, as shown by the line extending from point P.
  2. Consumer surplus is the area above the price line (which is parallel to the x-axis) and below the demand curve.
  3. In the diagram, the price level consumers pay is represented by line AB.
  4. The maximum price consumers are willing to pay is at point P, above A, where the demand curve starts.
  5. Thus, the consumer surplus is the triangular area formed by points A, B, and the point P on the demand curve above A.

This area is correctly marked as AB in the diagram provided. Therefore, the measure of consumer surplus in this standard diagram is the area AB.

Conclusion: The correct answer is \(AB\), as it represents the area of consumer surplus in the provided economic graph.

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Important Questions from Microeconomics

  1. Match the following List-I with List-II :
    LIST-ILIST-II
    1. Absolute Advantagea. Paul Rosenstein Rodan
    2. Theory of Big Pushb. Adam Smith
    3. Theory of low level Equilibrium trapc. Richard R. Nelson
    4. Balanced Growth Theoryd. Ragner Nurkse
    Choose the correct option :
  2. Managerial Economics is essentially __________ in the field of business management.
  3. Kumar used to eat 30 samosas in a month when the price of each samosa was ₹12. When the price of samosa increased to ₹15 per piece, he eats only 20 samosas a month. What is the price elasticity of demand for samosa by Kumar?
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  5. According to the Law of Diminishing Returns, in a production function when more and more units of the variable factor are used, holding the quantities of a fixed factor constant, a point is reached beyond which
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