If the Market Price Is Above the Equilibrium Price, There

question 400

Multiple Choice

If the market price is above the equilibrium price, there will be a tendency for price to decrease, causing

• A) the quantity demanded to decrease and the quantity supplied to increase until they are equal.
• B) the quantity demanded to increase and the quantity supplied to decrease until they are equal.
• C) both quantity demanded and quantity supplied to decrease until they are equal.
• D) both quantity demanded and quantity supplied to increase until they are equal.

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Definitions:

Competitive Industry

An industry characterized by a large number of firms competing against each other, leading to innovation, varied product choices, and reasonable prices for consumers.

Marginal Cost

The cost associated with producing one more unit of a product, reflecting how production costs change with output levels.

Average Cost

The total cost of production divided by the number of units produced, often used to calculate the cost per unit.

Total Surplus

The overall net benefit to society, calculated as the sum of consumer surplus (benefits to consumers) and producer surplus (benefits to producers) from a transaction.