What happens to a market in equilibrium when there is an increase in supply?
a) excess supply means that producers will make less of the good
b) quantity demanded will exceed quantity supplied, so the price will drop
c) quantity supplied will exceed quantity demanded, so the price will drop
d) undersupply means that the good will become very expensive
Answer: Quantity supplied will exceed quantity demanded, so the price will drop.
You might also like to view...
What is the yield to maturity of a consol with a coupon of $85 and a price of $944.44?
A) 5.56% B) 8.50% C) 9.00% D) Not enough information has been provided to determine the answer.
Which of the following is not a probable consequence of food aid to developing countries?
a. Increased domestic food prices b. Declining domestic output c. Misallocation of food supplies d. Increased dependency on foreign food supplies e. Increased starvation of the needy
The "information barrier" that is the root cause of business cycles in the Lucas model is that
A) workers observe the prices of what they personally buy, but cannot observe the general price level. B) workers do not know when changes in the price level mean changes in the prices of the goods they buy. C) firms do not know when changes in the price of the good they sell matches changes in the price level and thus their marginal cost. D) firms do not know if a change in the price level will have any effect on their marginal cost and thus their willingness to supply.
At an output of 12, ATC is $12 and price is $9. At an output of 13, ATC is $12.40 and price is $9. MC = MR at an output of 12.6. At that output the firm will
A. take a loss. B. break-even. C. make a profit.