The Diagram Concerns Supply Adjustments to an Increase in Demand

question 359

Multiple Choice

The diagram concerns supply adjustments to an increase in demand (D₁ to D₂) in the immediate market period, the short run, and the long run. In the immediate market period, the increase in demand will

• A)have no effect on either equilibrium price or quantity.
• B)increase equilibrium price but not equilibrium quantity.
• C)increase equilibrium quantity but not equilibrium price.
• D)increase both equilibrium price and quantity.

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Definitions:

Maximizes Profits

A strategy or condition where a business adjusts its operations, production, and pricing to achieve the highest possible financial gain.

MR = MC

A condition in economics where marginal revenue equals marginal cost, often used to determine the optimal level of production and pricing for firms.

Minimizes Losses

Strategies or actions taken to reduce the amount of money or resources that are wasted or not profitably used.

AVC

Average Variable Cost refers to the total of all variable expenses incurred, divided by the total number of units produced.