An Increase in Demand for a Product and a Reduction

question 194

Multiple Choice

An increase in demand for a product and a reduction in the costs of production would:

• A)cause a persistent shortage of the product.
• B)encourage firms to exit the industry.
• C)increase profits.
• D)encourage firms to enter the industry.
• E)both increase profits and encourage firms to enter the industry.

---

Definitions:

Equilibrium Position

The state in which market supply and demand balance each other, resulting in stable prices and quantities.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased with a given income.

Indifference Curves

Graphical representations used in economics to show the different combinations of two goods that give a consumer equal satisfaction and utility.

Indifference Curve

A graph showing different combinations of two goods between which a consumer is indifferent, reflecting preferences and trade-offs.