Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
A. will decrease but equilibrium quantity will increase.
B. and quantity will both decrease.
C. will increase, but equilibrium quantity will decline.
D. will increase, but equilibrium quantity will be unchanged.
Answer: D
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At a price of $1 per table, the quantity supplied of tables is 100 units whereas the quantity demanded is 70 units. Given this information, which of the following statements is true?
A) $1 per table is the market clearing price. B) At $1 per table, there is a surplus in the market. C) At $1 per table, there is a shortage in the market. D) $1 per table is the equilibrium price.
One practical implication of a kinked market supply curve is that:
A) producer surplus is not defined at the kink point. B) the MC = MR rule does not hold at the kink point. C) the market supply elasticity for a price increase may be different than the market supply elasticity for a price decrease at the kink point. D) All of the above are true.