Suppose a Competitive Market Has a Downward-Sloping Demand Curve and a Horizontal

question 166

Essay

Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve.If the supply curve shifts downward, what will happen to equilibrium price, equilibrium quantity, consumer surplus, and producer surplus?
A.decrease, increase, increase, decrease
B.decrease, decrease, increase, no change
C.decrease, increase, increase, no change
D.decrease, increase, no change, increase

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Definitions:

Returns To Scale

Rate at which output increases as inputs are increased proportionately.

Increasing Marginal Product

A situation where each additional unit of input results in an increased amount of output.

Economic Rents

Extra earnings above the minimum amount necessary to keep a factor of production in its current use.

Accounting Costs

The explicit costs of a business, representing the actual outflows of cash for wages, rent, materials, and other tangible inputs.