When the Price of a Good Is Below Its Equilibrium

question 127

Multiple Choice

When the price of a good is below its equilibrium value,

• A) consumers will bid the price up.
• B) excess supply will occur.
• C) it will tend to stay below the equilibrium value.
• D) suppliers will notice their inventories are growing.
• E) suppliers will lower the price.

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Definitions:

Profit Maximizing

A strategy or point at which a business achieves the highest level of profit possible with the given resources and market conditions.

Parallel Conduct

Form of implicit collusion in which one firm consistently follows actions of another.

Implicit Collusion

An understanding or arrangement among competitors where they cooperate indirectly by making similar business decisions without explicit agreement.

Cartel Activities

Actions taken by a group of independent market participants who collude to raise prices, limit supply, or control markets in some other way.