-The Above Diagram (A)represents the Demand for and Supply of a Brand

question 1

Multiple Choice

-The above diagram (a) represents the demand for and supply of a brand of automobile (Turbo-car) for a car manufacturing company named Fancy Auto.Assume that D_L represents low demand for the Turbo-car,D_M represents the medium level of demand and,D_H represents the high level of demand for Turbo-car and Fancy Auto's optimal output level is 900 cars per week.If the prices are flexible,Fancy Auto:

• A) can continue to sell its optimal output regardless of the demand level.
• B) can continue producing its optimal output level only if demand is at D_L level.
• C) can continue producing its optimal output level only if demand is at D_M level.
• D) can continue producing its optimal output level only if demand is at D_H level.

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Definitions:

Demand And Supply Shocks

Unexpected events that cause sudden and significant changes in the demand or supply of goods and services in the economy.

Marginal Revenue

The increase in income resulting from the sale of one extra unit of a product or service.

Average Revenue

The amount of revenue a company receives per unit of sales, calculated by dividing total revenue by the number of units sold.

Market Equilibrium

A condition in which market supply and demand balance each other, and as a result, prices become stable.