Question

94. Refer to the above diagram. A price of $20 in this market will result in:

A. a shortage of 50 units.
B. a surplus of 50 units.
C. a surplus of 100 units.
D. a shortage of 100 units.

Answer 1

In this market, a price of $20 would result in a surplus of 100 units. If the price was $120, there would be a surplus of 140 units.

Step-by-step explanation:

In this market, a price of $20 would result in a surplus of 100 units. To understand why, let's look at the diagram. The quantity supplied at $20 is 150 units, while the quantity demanded is only 50 units. Since the quantity supplied exceeds the quantity demanded by 100 units, there would be a surplus.

If the price was $120, the quantities demanded and supplied would be different. In this case, the quantity demanded would be 10 units, while the quantity supplied would be 150 units. This means that there is a surplus of 140 units at the price of $120.