When Price Is Less Than the Equilibrium Price

question 34

Multiple Choice

When price is less than the equilibrium price:

• A) excess supply exists.
• B) there is a tendency for price to increase.
• C) there is a tendency for price to decrease.
• D) quantity supplied exceeds quantity demanded.

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Definitions:

Fixed Cost

Expenses that do not change with the level of goods or services produced by a business.

Total Revenue

The total amount of money generated by a company or entity from its primary activities, such as sales of goods or services, before any expenses are deducted.

AVC

Short for Average Variable Cost, it is the total variable costs (such as labor and materials) divided by the quantity of output produced.

ATC

Stands for "Average Total Cost," which is the total cost per unit of output in economics, calculated by dividing the total cost by the quantity produced.