In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-The price of a resource declines when:
A)both the demand for and the supply of the resource declines in the same proportion.
B)demand remaining constant, supply of the resource declines.
C)supply remaining constant, the demand for the resource declines.
D)both the demand for and the supply of the resource increases in the same proportion.
E)both the demand for and the supply of the resource declines, but supply falls by a greater proportion than demand.

Question

In the following figure, the first panel shows a market situation prior to regulation and the second panel shows the effects of regulation.Figure 14.2
  In the figure,
D: Demand curve for automobiles
S 1 : Supply curve of automobiles prior to regulation
S 2 : Supply curve of automobiles after regulation
FG: Clean up cost per unit
-The price of a resource declines when:
A)both the demand for and the supply of the resource declines in the same proportion. 
B)demand remaining constant, supply of the resource declines. 
C)supply remaining constant, the demand for the resource declines. 
D)both the demand for and the supply of the resource increases in the same proportion. 
E)both the demand for and the supply of the resource declines, but supply falls by a greater proportion than demand.

Quizplus · Accepted Answer

When supply remains constant and demand for a resource declines, the price of the resource typically decreases because there is less competition for the same amount of resource.

In the Following Figure, the First Panel Shows a Market