Assume That the Equilibrium Price for a Good Is $5

question 158

Multiple Choice

Assume that the equilibrium price for a good is $5. If the market price is $10, a:

• A) shortage causes the price to decline toward $5.
• B) surplus causes the price to rise above $10.
• C) shortage causes the price to rise above $10.
• D) surplus causes the price to decline toward $5.

---

Definitions:

Weekly Demand

The total quantity of goods or services that consumers wish to purchase within a week, often used for inventory and production planning.

Holding Cost

The costs related to keeping inventory that hasn't been sold, covering storage fees, insurance, and losses due to items going bad.

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Economic Order Quantity

A calculation used to determine the optimal order quantity that minimizes the total inventory costs, including holding and ordering costs.