Suppose You Are Told That the Equilibrium Price of Gasoline

question 38

Multiple Choice

Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?

• A)Demand increased.
• B)Demand decreased.
• C)Supply increased.
• D)Supply decreased.

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Definitions:

AVC

Average Variable Cost; the total variable costs divided by the number of units produced, indicating the variable expense per unit of output.

MP

Marginal Product, which refers to the increase in output that results from employing an additional unit of input, holding all other inputs constant.

Average Fixed Cost

Average Fixed Cost refers to the total fixed costs (costs that do not change with the level of output) divided by the quantity of output produced. It decreases as production increases.

Total Variable Cost

The total of expenses that vary directly with the level of production, such as raw materials and direct labor.