A surplus exists in the market for Barbie dolls at the prevailing price. The surplus will be eliminated by a price:
A)increase, decreasing the supply and increasing the demand.
B)decrease, decreasing the supply and increasing the demand.
C)decrease, increasing the quantity supplied and increasing the quantity demanded.
D)decrease, decreasing the quantity supplied and increasing the quantity demanded.

Question

A surplus exists in the market for Barbie dolls at the prevailing price. The surplus will be eliminated by a price:
A)​increase, decreasing the supply and increasing the demand.
B)​decrease, decreasing the supply and increasing the demand.
C)​decrease, increasing the quantity supplied and increasing the quantity demanded.
D)​decrease, decreasing the quantity supplied and increasing the quantity demanded.

Quizplus · Accepted Answer

A surplus indicates that the quantity supplied is greater than the quantity demanded at the current price, so the price needs to decrease to encourage more buyers and discourage suppliers from producing so much. This will decrease the quantity supplied and increase the quantity demanded until the market reaches equilibrium. Therefore, the best choice is to decrease the price, which will decrease the quantity supplied and increase the quantity demanded, as stated in option D. Option B is incorrect because increasing the supply would only exacerbate the surplus problem. Option A is incorrect because decreasing the supply would not address the surplus but could lead to a shortage. Option C is incorrect because increasing both quantity supplied and quantity demanded would only shift the surplus to a higher quantity level without addressing its existence.

A Surplus Exists in the Market for Barbie Dolls at the Prevailing