Consider the Market for a Good That Is Initially in Equilibrium.Which

question 62

Multiple Choice

Consider the market for a good that is initially in equilibrium.Which of the following is most likely to happen if supply increases by a smaller amount than the increase in demand?

• A)Equilibrium price will fall and equilibrium quantity will rise.
• B)Equilibrium price will rise and equilibrium quantity will fall.
• C)Both equilibrium price and equilibrium quantity will rise.
• D)Equilibrium price will rise but the change in equilibrium quantity is indeterminate.
• E)Both equilibrium price and equilibrium quantity will fall.

---

Definitions:

Permits

Official documents or licenses that authorize individuals or companies to undertake certain activities, often subject to regulations.

Pollution

The introduction of contaminants into the natural environment that cause adverse change.

External Costs

Costs that are not reflected in the market price of goods or services, often burdening third parties not involved in the transaction.

External Benefits

Positive effects of a production or consumption activity on third parties not directly involved in the transaction.