Without Restrictions,the Market Supply Curve Is Horizontal at P =

question 7

Multiple Choice

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

• A) there will be a decrease in consumer surplus.
• B) the remaining taxi cab drivers will make positive economic profits.
• C) there will be an increase in producer surplus.
• D) All of the above.

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Definitions:

Convertible Bonds

Bonds issued by a company that can be exchanged by the holder for a predetermined number of the company's shares.

Common Stock

A type of security that represents ownership in a corporation and entitles its holder to a share of the company's profits through dividends and/or capital appreciation.

Face Value

The nominal value or dollar value stated on a financial instrument, such as a bond or stamp.

Dollar Amount

A monetary value stated in terms of the currency unit of the United States, the dollar.