Suppose a Shortage for Good X Exists

question 125

Multiple Choice

Suppose a shortage for good X exists. Given this information, we know that

• A)the price of good X will tend to rise toward the equilibrium level.
• B)the price of good X will tend to fall toward the equilibrium level.
• C)a government price floor should be imposed above the current price so that the market can work more effectively.
• D)a government price ceiling should be imposed above the current price so that the market can work more effectively.

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Definitions:

High Costs

Refers to situations where the expenses associated with production, maintenance, or other operations are significantly above the average.

Negative Externalities

Costs not incurred by consumers or producers but by a third party or the environment, as a result of an economic activity.

Opt Out

The act of choosing not to participate in an activity, service, or agreement, often referring to the decision by an individual or organization to not conform to a standard, policy, or regulation.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive, due to higher market prices.