When there is a shortage in the market, competition will:
A) drive the price down to the equilibrium price.
B) drive the price up to the equilibrium price.
C) cause the demand curve to shift right.
D) cause the supply curve to increase.

Question

Quizplus · Accepted Answer

When there is a shortage in the market, it means that demand exceeds supply at the current price level, so there are more buyers than sellers. This creates competition among buyers, who are willing to pay a higher price to get the limited supply available. As a result, prices will increase until they reach the equilibrium price, where the quantity demanded equals the quantity supplied. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they imply that prices will decrease or supply will increase, which is not the case in a shortage situation.

When There Is a Shortage in the Market, Competition Will