If Supply Decreases, Ceteris Paribus, the Quantity Exchanged Will Be

question 86

Multiple Choice

If supply decreases, ceteris paribus, the quantity exchanged will be ______ at the new market equilibrium point.

• A) larger
• B) smaller
• C) the same
• D) either larger or smaller

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Definitions:

Short-Run Equilibrium

The condition in which, in the short term, the quantity of goods supplied equals the quantity of goods demanded at the current price.

Marginal Revenue

The income increment from disposing of an extra unit of a good or service.

Marginal Cost

The expenses involved in creating an additional unit of a product or service.

Maximize Profits

The process of increasing the difference between total revenues and total costs to achieve the highest possible earnings.