Following Adjustments to a New Equilibrium in a Market, the Equilibrium

question 50

Multiple Choice

Following adjustments to a new equilibrium in a market, the equilibrium quantity remains unchanged, but the market clearing price is now lower. Which of the following could definitely have caused this outcome?

• A) Demand and supply both increased.
• B) Demand and supply both decreased.
• C) Demand increased, and supply decreased.
• D) Demand decreased, and supply increased.

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Definitions:

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the quantity of output produced, indicating the cost of producing an additional unit.

Marginal Cost

The boost in expenditure linked to creating an additional unit of a good or service.

Average Total Cost

Refers to the sum of all production costs divided by the total output produced, indicating the cost per unit of producing a good or service.

Cakes

Baked desserts that are typically sweet and made from ingredients such as flour, sugar, and eggs.