Suppose the supply curve has the usual upward slope while the demand curve is horizontal. This would imply that:
A) Market prices would tend to stay below the predicted equilibrium price since the magnitude of consumer surplus is smaller than that of producer surplus.
B) Market prices would tend to stay above the predicted equilibrium price since the magnitude of consumer surplus is smaller than that of producer surplus.
C) Market prices would tend to stay below the predicted equilibrium price since the magnitude of consumer surplus is larger than that of producer surplus.
D) Market prices would converge smoothly to the predicted equilibrium price since the magnitude of consumer surplus is approximately equal to that of producer surplus.

Question

Quizplus · Accepted Answer

The Answer of Suppose the supply curve has the usual upward slope while the demand curve is horizontal. This would imply that:
A) Market prices would tend to stay below the predicted equilibrium price since the magnitude of consumer surplus is smaller than that of producer surplus.
B) Market prices would tend to stay above the predicted equilibrium price since the magnitude of consumer surplus is smaller than that of producer surplus.
C) Market prices would tend to stay below the predicted equilibrium price since the magnitude of consumer surplus is larger than that of producer surplus.
D) Market prices would converge smoothly to the predicted equilibrium price since the magnitude of consumer surplus is approximately equal to that of producer surplus.

Suppose the Supply Curve Has the Usual Upward Slope While