When Supply and Demand for a Product Increase Simultaneously, We

question 42

Multiple Choice

When supply and demand for a product increase simultaneously, we

• A) can predict that both the market clearing price and the equilibrium quantity will increase.
• B) can predict that both the market clearing price and the equilibrium quantity will decrease.
• C) cannot predict the market clearing price, but know that the equilibrium quantity will increase.
• D) cannot predict the change in either the equilibrium quantity or the market clearing price.

---

Definitions:

Direct Manufacturing Cost

These are costs that can be directly traced to the production of specific goods or services, such as raw materials and direct labor.

Differential Costs

The difference in total cost that will result from selecting one choice over another.

Sunk Costs

Sunk costs refer to money already spent and permanently lost, which cannot be recovered and should not influence future financial decisions.

Opportunity Costs

A rephrased definition: The potential gains or benefits that are lost when choosing one alternative over another in decision-making.