Question

Which of the following statements is NOT true?

A.

A rise in the price of aluminum will cause an increase in the demand for steel and plastic.

B.

Only a change in a good’s own price will cause a change in the quantity demanded of the good.

C.

For the equilibrium quantity of a good, consumer surplus is positive for every unit consumed except for the last unit, which has zero consumer surplus.

D.

The economic value of a kilowatt of electricity is the difference between the price paid for a kilowatt and the minimum price the electric company will accept to produce a kilowatt.

Answer 1

Which of the following statements is NOT true?

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Correct choice:

D. The economic value of a kilowatt of electricity is the difference between the price paid for a kilowatt and the minimum price the electric company will accept to produce a kilowatt.

Explanation:

The economic value of a kilowatt of electricity is actually the benefit of that kilowatt of electricity to the consumer. It can also be stated as the maximum willingness to pay.

The difference between WTP and price gives us the consumer surplus.

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Other options:

It is true that only a change in a good’s own price will cause a change in Qd of the good. Other changes will shift the demand curve.

A rise in the price of aluminum will cause an increase in the demand for steel and plastic, as they are substitutes of aluminum.

Consumer surplus is WTP minus P. At equilibrium, this becomes zero, as WTP = P.