If There Is a Surplus of a Good in a Free

question 23

Multiple Choice

If there is a surplus of a good in a free market, then it is expected that:

• A) the supply curve will shift to the right.
• B) the price in the market will fall.
• C) the quantity supplied will increase.
• D) the demand curve will shift to the left.

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Definitions:

Excess Capacity

The situation where a firm or economy can produce more goods or services than currently produced, indicating under-utilization of resources.

Marginal Costs

The additional cost incurred by producing one more unit of a product, which can vary as production scales.

Diseconomies of Scale

A situation where an increase in production leads to higher average costs for firms, contrary to economies of scale.

ATC

Average Total Cost, the total cost divided by the quantity of output produced; it's a measure of per-unit production cost.