Which of the following best describes the market reaction if a city restricts the number of firms that are allowed to operate in a market?
A)The market supply curve shifts to the left.
B)The market demand curve shifts to the left.
C)Quantity supplied increases because price increases.
D)Price decreases.

Question

Quizplus · Accepted Answer

Restricting the number of firms allowed to operate in a market would limit competition, thus reducing the quantity supplied in the market. As a result, the market supply curve would shift to the left. Prices may increase due to reduced supply, but this would not necessarily lead to an increase in quantity supplied.

Which of the Following Best Describes the Market Reaction If