An Increase in Supply and a Decrease in Demand Occur

question 7

Multiple Choice

An increase in supply and a decrease in demand occur in a market. What happens to the equilibrium price and quantity?

• A) The equilibrium price decreases; the change in the equilibrium quantity is uncertain.
• B) The equilibrium price decreases; the equilibrium quantity increases.
• C) The equilibrium price increases; the change in the equilibrium quantity is uncertain.
• D) The equilibrium price increases; the equilibrium quantity decreases.

---

Definitions:

International Trade

The exchange of goods, services, and capital between countries or territories, influenced by agreements, tariffs, and global economic policies.

Autarky Price

The price of a good or service within a country when it is completely self-sufficient and not engaged in international trade.

World Price

The international price at which goods are traded between countries, influencing domestic prices and the balance of trade.

Comparative Advantage

The ability of a country or entity to produce a specific good or service at a lower opportunity cost than others, leading to specialization in trade.