Assume Declining Profits in the Market for Internet Service Force

question 65

Multiple Choice

Assume declining profits in the market for Internet service force several firms in the area to drop out of the market.Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity?

• A)Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
• B)Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal.
• C)Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
• D)Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.

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Definitions:

Process Reengineering

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed.

Customer Satisfaction

The degree to which a product or service meets or exceeds the customer's expectations.

Customer Needs

The requirements or desires of consumers that companies aim to meet with their products or services.

Process Reengineering

The radical redesign of core business processes to achieve dramatic improvements in productivity, efficiency, and quality.