Firms that produce 80 percent of all computer chips have shut down their facilities for maintenance. In the computer chip market this will lead to
A)an increase in price and a decrease in quantity.
B)an increase in price and an increase in quantity.
C)a decrease in price and a decrease in quantity.
D)a decrease in price and an increase in quantity.

Question

Quizplus · Accepted Answer

When 80 percent of firms shut down their facilities for maintenance, the supply of computer chips will decrease, causing a shift to the left in the supply curve. This will lead to an increase in price, as some consumers will be willing to pay a higher price for the limited supply. Additionally, since the supply has decreased, the quantity of computer chips in the market will decrease. Therefore, choice A is correct. Choices B, C, and D are incorrect, as they suggest either an increase in supply or a decrease in price, which is unlikely to occur in this situation.

Firms That Produce 80 Percent of All Computer Chips Have