Final answer:
If car manufacturers produce more cars than customers will buy, there will be a surplus; if they produce fewer, there will be a shortage. A surplus occurs when the price is above equilibrium, leading to excess supply, and a shortage happens when the price is below equilibrium, leading to excess demand.
Step-by-step explanation:
If car manufacturers produce more or fewer cars than customers will buy, the car market will be in either a surplus or a shortage.
When the price of cars is above equilibrium, manufacturers may end up producing more cars than are bought by customers, leading to an excess supply or a surplus. Conversely, when the price is below equilibrium, there is excess demand because the quantity demanded at the lower price exceeds the quantity that companies are willing to supply, causing a shortage. During a shortage, customers may find it difficult to purchase a car at the current price, and car dealers might recognize an opportunity to make higher profits by increasing prices toward the equilibrium level.
Therefore, the correct answer to the student's question is: b. Surplus if they produce more and c. Shortage if they produce fewer.