Without Restrictions,the Market Supply Curve Is Horizontal at P =

question 7

Multiple Choice

Without restrictions,the market supply curve is horizontal at P = 5,and the inverse demand curve for taxi cab rides is P = 20 - Q in a competitive market.Subsequently,only 10 taxi cabs are allowed in the market.After the market adjusts to the restricted supply,

• A) there will be a decrease in consumer surplus.
• B) the remaining taxi cab drivers will make positive economic profits.
• C) there will be an increase in producer surplus.
• D) All of the above.

---

Definitions:

Inventory

Inventory encompasses all the goods and materials a business holds for the purpose of resale, production, or utilization.

Equipment

Tools or machinery used for specific purposes, especially in the context of manufacturing or industrial operations.

Goods and Services

The output of an economy that satisfies consumer or business needs, where goods are physical items and services are intangible activities or benefits.

Capital Spending

Expenditures by businesses to acquire or upgrade physical assets such as property, industrial buildings, or equipment to increase their capacity or efficiency.