The following question(s) are based on Figure 1-5. a: Refer to Figure 1-5. If th

Question

The following question(s) are based on Figure 1-5.

a: Refer to Figure 1-5. If the price is $25, then
            A) there would be a surplus of 300.
            B) there would be a shortage of 300
            C) there would be a surplus of 200.
            D) there would be a shortage of 200.

E) None Of The Above ........

b: Refer to Figure 1-5. At a price of $25, how many units will be sold?

            A) 400
            B) 500
            C) 600
            D) 800

            E) None Of The Above

c: Refer to Figure 1-5. If the prevailing price is $25, the market will achieve equilibrium by

            A) a price increase, increasing the supply and decreasing the demand.
            B) a price decrease, decreasing the supply and increasing the demand.
            C) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
            D) a price increase, increasing the quantity supplied and decreasing the quantity demanded.

            E) None Of The Above

Explanation / Answer

A.) answer is A
800-500 = 300 unit surplus (demand is less than supply)
B.) answer is B
At $25, demand is 500, so 500 will be sold
C.) C

The difference between quantity supplies and supply is quantity supply means the point along the line changes. Supply changing means the actual line shifts, which is not the case, so the answer is C and not B

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