If Supply Increases and at the Same Time Demand Decreases

question 11

Multiple Choice

If supply increases and at the same time demand decreases, equilibrium price:

• A) decreases and equilibrium quantity is indeterminate.
• B) increases and equilibrium quantity decreases.
• C) is indeterminate and equilibrium quantity increases.
• D) is indeterminate and equilibrium quantity decreases.

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Definitions:

Tacit Collusion

An informal and indirect form of collusion among competitors without explicit agreement, often through signaling and understanding of mutual interests.

Market Power

The ability of a firm or group of firms to manipulate the price of a good or service in the market by controlling supply, demand, or both.

Long-run Equilibrium

A state in which all factors of production are fully adjusted to the economic conditions, and all inputs and outputs are at their optimal levels without any external pressures.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for significant differentiation and competition.