Let D = Demand, S = Supply, P = Equilibrium

question 76

Multiple Choice

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity.What happens in the market for redwood trees if the government restricts the amount of forest lands that can be logged?

• A)D decreases, S no change, P and Q decrease
• B)S decreases, D no change, P increases, Q decreases
• C)D and S decrease, P and Q increase
• D)D no change, S decreases, P increases, Q increases

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold, determined by the supply and demand forces in the market.

Perfect Competition

A market structure characterized by many sellers and buyers, homogeneous products, and free entry and exit, leading to optimal prices.

Identical Product

Goods that are exactly the same in terms of quality, size, and features, making them perfect substitutes for each other.

Economic Profit

The gap between the overall income generated and the sum of all expenses, covering both direct and indirect costs.