Question

Which of the following describes a situation in which a surplus occurs?

A. A clothing company begins producing sweaters before the winter arrives.
B. A car company tries to charge too high a price for a new SUV.
C. A cable television company increases its rates.
D. A theater sells fewer tickets than there are available seats.

Answer 1

A surplus occurs when the supply of a good exceeds demand, as in option D, where a theater has more seats than ticket buyers. This leads to an excess supply, which could cause sellers to lower prices to stimulate demand and reach market equilibrium.

Step-by-step explanation:

An economic surplus occurs when the quantity supplied of a good exceeds the quantity demanded at the existing price. Answer D, which describes a theater selling fewer tickets than there are available seats, best represents a scenario where a surplus would occur because the quantity of tickets available (supply) surpasses the number of tickets consumers are willing to purchase (demand). This situation aligns with the concept of excess supply, where there is more of a product available than what is being bought, leading to potential price cuts to increase demand.

In contrast, options A, B, and C describe scenarios that might result in high demand, high pricing, or rate increases, but do not directly illustrate a situation of surplus where supply exceeds demand. These scenarios don't reflect the principles where, in the event of a surplus, pressures in the market would usually lead to price reductions to stimulate demand and reach equilibrium, as explained in the description of how gasoline accumulates due to a surplus and sellers have to lower prices to incentivize purchases.

Answer 2

The correct answer is D.

A surplus occurs when there is more of a good, product, or service than demanded by citizens. In the theater example, there are more seats than people who are willing to pay for them. This shows that the theater will have a surplus of seats, as not all of them will be filled for the show.