MC Qu. 58 Answer the next question based on...

Answer the next question based on the following supply and demand schedules in units per week for a product.

Price Quantity Demanded Quantity Supplied
$60 100 400
50 140 340
40 180 280
30 220 220
20 260 160
10 300 100

If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be

BlackTom Analysis

Question

MC Qu. 58 Answer the next question based on...

Answer the next question based on the following supply and demand schedules in units per week for a product.

Price	Quantity Demanded	Quantity Supplied
$60	100	400
50	140	340
40	180	280
30	220	220
20	260	160
10	300	100

If demand increased by 100 units at each price level, and the government set a price ceiling of $40, then there will be

BlackTom Analysis

BlackTom AI · Accepted Answer

First, restate the scenario to ensure understanding: we have supply and demand schedules, a price ceiling set at $40, and demand is increased by 100 units at every price level.

Option A: a surplus. To determine if a surplus exists at the ceiling, compare quantity supplied and quantity demanded at the ceiling price after the shift. After increasing demand by 100 units at each price, the new demand at $40 becomes 180 + 100 = 280. The quantity supplied at $40 remains 280. Since quantity demanded equals quantity supplied (both 280), there is no surplus.

Option B: no shortage or surplus. A shortage occurs when quantity demanded exceeds quantity supplied; a surplus occurs when quantity supplied exceeds quantity demanded. At the $40 ceiling, after the shift, both sides are equal at 280, so neither a shortage nor a surplus exists. This makes this option plausible.

Option C: a shortage. This would require quantity demanded > quantity supplied at $40. The shifted demand is 280 and the supply is 280, so there is not a shortage at this price, making this option incorrect.

Option D: decrease in supply. The price ceiling itself does not induce a decrease in supply; it constrains price but does not shift the supply curve in this setup. Since the supply schedule remains unchanged (still 280 at $40), this option misattributes the effect of a price ceiling and is inaccurate here.

To summarize the reasoning: after the demand shift, at the price ceiling of $40, quantity demanded equals quantity supplied (both 280 units). Therefore, neither a shortage nor a surplus arises under these conditions. The surplus option is not supported by the data, the shortage option contradicts the equal quantities, and the decrease in supply misinterprets the effect of a price ceiling on the supply curve.

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