Q&A Hero

Q: A simple linear demand function may be stated as Q = a - bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for c, we can use observed values for Q and I and then set the estimated income elasticity of demand equal to: A) c(I/Q) B) c(Q/I) C) -b(I/Q) D) Q/(cI)

Q: One form of economic stimulus that state governments can use is to exempt certain types of purchases from state sales tax. For example, a law that permanently exempts business equipment from state sales tax may stimulate purchases of these goods because the law effectively reduces the price of the equipment. Business equipment such as computers or vehicles are durable goods, so should we expect the tax exemption program to have more impact on equipment demand in the short run or long run? A) More impact in the long run because business equipment demand becomes more income elastic in the long run B) More impact in the long run because business equipment demand becomes more price elastic in the long run C) More impact in the short run because business equipment demand becomes more income elastic in the long run D) More impact in the short run because business equipment demand becomes more price inelastic in the long run

Q: Supply curves for secondary supply resources (e.g., scrap metal) become: A) Steeper in the short run B) More elastic in the long run C) Steeper in the long run D) More inelastic in the short run

Q: For automobile demand in the U.S., the income response tends to be larger in the: A) short run. B) long run. C) The income response is the same in the long run and the short run. D) We do not have enough information to answer this question.

Q: For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment, and the long-run income response tends to be smaller. Industries that face demand behavior of this type are known as: A) natural monopolies. B) cartels. C) cyclical industries. D) constant-cost industries.

Q: For computers and other business equipment, small changes in business earnings tend to generate relatively large short-run changes in the demand for this equipment. In the long run, the responsiveness of demand for business equipment with respect to income changes tends to be: A) even more responsive. B) less responsive. C) equally responsive. D) none of the above

Q: Consider a linear, upward sloping supply curve. If the supply curve shifts upward, then: A) the price elasticity of supply will increase. B) the price elasticity of supply will increase if the slope of the supply curve is greater than one. C) the price elasticity of supply will increase if the slope of the supply curve is greater than one and the lowest price needed to induce firms to supply anything is positive. D) the price elasticity of supply will be constant. E) none of the above

Q: Consider a supply curve of the form: Q = c + dP. If d equals zero, then supply is: A) completely inelastic. B) inelastic, but not completely inelastic. C) elastic, but not infinitely elastic. D) infinitely elastic

Q: A demand curve of the form: Q = a - bP, where a and b are positive real numbers,: A) is an upward sloping straight line. B) has a constant price elasticity of demand. C) is a downward sloping straight line. D) is a parabolic curve.

Q: There are two techniques of egg production: free range (where hens roam around the farm) or factory (where hens are fed and watered in wire cages). The free range technique has a much more elastic supply curve than the factory technique. When the demand for eggs falls: A) egg production using the factory technique falls less than with the free range technique. B) egg production using the factory technique falls more than with the free range technique. C) the production using both techniques falls by the same amount. D) the factory egg producers supply curve shifts inward. E) the free range egg producers supply curve shifts inward.

Q: An important determinant of the amount of grains harvested next year by Ethiopian farmers is the amount of seeds planted this year. Given that Western nations have guaranteed to donate five hundred tons of grain next year, this year the Ethiopian farmers will: A) plant more seeds as the food aid establishes a minimum price for grain. B) plant more seeds as the farmers' confidence is restored. C) plant the same amount of seeds as they would have without the food aid. D) plant fewer seeds as consumers demand for grain is completely price elastic. E) plant fewer seeds as the price of grain will be lower with the food aid.

Q: This year a new oil field with substantial reserves has been discovered. Such discoveries are not made every year. Therefore an increase in the demand for oil will: A) increase the long-run price of oil more than the short-run price of oil. B) increase the long-run price of oil less than the short-run price of oil. C) ensure the long-run price of oil and short-run price of oil increase by the same amount. D) ensure that the short-run price of oil falls. E) ensure that the short-run price of oil remains unchanged.

Q: Use the following two statements to answer this question: I. The supply of newly mined copper is more elastic in the long run than in the short run. II. The supply of scrap copper is more elastic in the short run than in the long run. A) Both I and II are true. B) I is true, and II is false. C) I is false, and II is true. D) Both I and II are false.

Q: A freeze in Florida's orange growing regions will: A) result in a sharp increase in the price of oranges in the short run because demand and supply are highly inelastic. B) result in a sharp increase in the price of oranges in the short run because demand and supply are highly elastic. C) result in a sharp decrease in the price of oranges in the short run because demand is highly inelastic and supply is highly elastic. D) result in little change in the price of oranges in the short run because supply is infinitely elastic.

Q: In the long run, new firms can enter an industry and so the supply elasticity tends to be A) more elastic than in the short run. B) less elastic than in the short run. C) perfectly elastic. D) perfectly inelastic.

Q: Due to capacity constraints, the price elasticity of supply for most products is: A) the same in the long run and the short run. B) greater in the long run than the short run. C) greater in the short run than in the long run. D) too uncertain to be estimated.

Q: Use the following statements to answer this question: I. Even though people need water to survive, the price of water is less than the price of diamonds because water is in greater supply than diamonds. II. Suppose that the demand for corn is highly price inelastic. If every corn farmer's harvesting technologies become more efficient, the total revenue received by all corn farmers would fall. A) I and II are true. B) I is true, and II is false. C) II is true, and I is false. D) I and II are false.

Q: The introduction of refrigerators into American homes: A) decreased the magnitude of the short run own price elasticity of demand for raw meat. B) did not affect the short run own price elasticity of demand for raw meat. C) increased the magnitude of the short run own price elasticity of demand for raw meat. D) decreased the magnitude of the short run own price elasticity of demand for smoked meats.

Q: Ice cream can be frozen. In the short run the magnitude of the own price elasticity of demand for ice cream: A) is higher than in the long run. B) is lower than in the short run. C) is the same as in the long run. D) does not depend on the fact that ice cream can be frozen.

Q: The demand for tickets to the Daytona 500 NASCAR event is given by the equation QD = 350,000 - 800P. The supply of tickets to the event is given by the capacity of the Daytona track, which is 150,000. What is the equilibrium price of tickets to the event? What is the price elasticity of demand at the equilibrium price? What is the price elasticity of supply at the equilibrium price?

Q: The monthly supply of desktop personal computers is given by the equation QS = 15,000 + 43.75P. At a price of $800, what is the price elasticity of supply?

Q: The demand for packs of Pokemon cards is given by the equation QD = 500,000 - 45,000P. At a price of $2.50 per pack, what is the quantity demanded? At $5.00 per pack, what is the price elasticity of demand?

Q: The demand for a bushel of wheat in 1981 was given by the equation QD = 3550 - 266P. At a price of $3.46 per bushel, what is the price elasticity of demand? If the price of wheat falls to $3.27 per bushel, what happens to the revenue generated from the sale of wheat?

Q: Harding Enterprises has developed a new product called the Gillooly Shillelagh. The market demand for this product is given as follows: Q = 240 - 4P a. At what price is the price elasticity of demand equal to zero? b. At what price is demand infinitely elastic? c. At what price is the price elasticity of demand equal to one? d. If the shillelagh is priced at $40, what is the point price elasticity of demand?

Q: Suppose the market price for wheat changes, and we move from point A to point B on the wheat demand curve. If the price elasticity of wheat demand was -0.3 at point A and -0.4 at point B, what is a plausible value for the arc elasticity of demand for wheat between points A and B? A) -0.25 B) -0.35 C) -0.45 D) -0.70

Q: Suppose the US demand curve for gasoline shifts rightward, and the U.S. supply curve for gasoline remains unchanged. As a result, the price of gasoline increases by 9 percent, and the equilibrium quantity increases by 3 percent. Which of the following statements is true based on this information? A) The price elasticity of supply for gasoline is roughly 0.33. B) The price elasticity of supply for gasoline is roughly 3. C) The price elasticity of demand for gasoline is roughly 0.33. D) The price elasticity of demand for gasoline is roughly -3.

Q: The price elasticity of gasoline supply in the U.S. is 0.4. If the price of gasoline rises by 8%, what is the expected change in the quantity of gasoline supplied in the U.S.? A) +3.2% B) -3.2% C) +32.0% D) +0.32%

Q: For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year? A) -2.75% B) +2.75% C) -27.5% D) +27.5%

Q: The cross-price elasticity of demand for peanut butter with respect to the price of jelly is -0.3. If we expect the price of jelly to decline by 15%, what is the expected change in the quantity demanded for peanut butter? A) +15% B) +45% C) +4.5% D) -4.5%

Q: Suppose the demand for gourmet coffee can be represented by a linear demand curve. At the prevailing market price the income elasticity of demand for gourmet coffee is 2. When income rises the demand curve for gourmet coffee: A) becomes less elastic at every price. B) becomes less elastic at the price that prevailed before the change in income C) becomes more elastic at every price D) becomes more elastic at the price that prevailed before the change in income

Q: If two goods are substitutes, the cross-price elasticity of demand must be A) negative. B) positive. C) zero. D) infinite.

Q: For most consumer goods, the price elasticity of demand is A) negative only when price decreases. B) negative regardless of the direction of the price change. C) positive only when price decreases. D) positive regardless of the direction of the price change.

Q: Consider the demand curve of the form Q = a - bP. If a is a positive real number, and b = 0, then demand is A) completely inelastic. B) inelastic, but not completely. C) unit elastic. D) elastic, but not infinitely.

Q: Which of the following pairs of goods are most likely to have a negative cross-price elasticity of demand? A) Hotdogs and hotdog buns B) Coke and Pepsi C) Rail tickets and plane tickets D) A Luciano Pavarotti compact disc and a Placido Domingo compact disc (Both Pavarotti and Domingo are opera stars.)

Q: Along any downward sloping straight-line demand curve: A) both the price elasticity and slope vary. B) the price elasticity varies, but the slope is constant. C) the slope varies, but the price elasticity is constant. D) both the price elasticity and slope are constant.

Q: Which of the following statements about the diagram below is true? A) Demand is infinitely elastic. B) Demand is completely inelastic. C) Demand becomes more inelastic as price declines. D) Demand becomes more elastic as price declines.

Q: Which of the following statements about the diagram below is true? A) Demand is infinitely elastic. B) Demand is completely inelastic. C) Demand becomes more inelastic the lower the price. D) Demand becomes more elastic the lower the price.

Q: Which of the following statements about the diagram below is true? A) Demand is infinitely elastic. B) Demand is completely inelastic. C) Demand becomes more inelastic the lower the price. D) Demand becomes more elastic the lower the price.

Q: At point E, demand is:A) completely inelastic.B) inelastic, but not completely inelastic.C) unit elastic.D) elastic, but not infinitely elastic.E) infinitely elastic.

Q: At point D, demand is:A) completely inelastic.B) inelastic, but not completely inelastic.C) unit elastic.D) elastic, but not infinitely elastic.E) infinitely elastic.

Q: At point C, demand is:A) completely inelastic.B) inelastic, but not completely inelastic.C) unit elastic.D) elastic, but not infinitely elastic.E) infinitely elastic.

Q: At point B, demand is:A) small.B) inelastic, but not completely inelastic.C) unit elastic.D) elastic, but not infinitely elastic.E) infinitely elastic.

Q: At point A, demand is:A) completely inelastic.B) inelastic, but not completely inelastic.C) unit elastic.D) elastic, but not infinitely elastic.E) infinitely elastic.

Q: The cross-price elasticity between a pair of complementary goods will be A) positive. B) negative. C) zero. D) positive or zero depending upon the strength of the relationship.

Q: Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good? A) price elasticity. B) income elasticity. C) cross-price elasticity. D) cross substitution elasticity.

Q: A vertical demand curve is A) completely inelastic. B) infinitely elastic. C) highly (but not infinitely) elastic. D) highly (but not completely) inelastic.

Q: Which of the following represents the price elasticity of demand?A) B) () + ()C) () x ()D) () - ()

Q: Elasticity measures A) the slope of a demand curve. B) the inverse of the slope of a demand curve. C) the percentage change in one variable in response to a one percent increase in another variable. D) sensitivity of price to a change in quantity.

Q: The price elasticity of demand for a demand curve that has a zero slope is A) zero. B) one. C) negative but approaches zero as consumption increases. D) infinity.

Q: The income elasticity of demand is the A) absolute change in quantity demanded resulting from a one unit increase in income. B) percent change in quantity demanded resulting from the absolute increase in income. C) percent change in quantity demanded resulting from a one percent increase in income. D) percent change in income resulting from a one percent increase in quantity demanded. E) percent change in income resulting from a one percent increase in price.

Q: Suppose that the resale of tickets to professional football games is illegal in Missouri. Due to the high demand for Chiefs (who play in Kansas City, Missouri) tickets there is a shortage of tickets at the current ticket price. Given that the Chiefs will not raise the price at which they sell the tickets, what would be the result of allowing tickets to be resold in a secondary market at whatever price the market would support? If speculators entered the market and began buying tickets directly from the Chiefs in hopes of reselling the tickets later, what would happen to the line outside of the ticket offices when the tickets are initially sold?

Q: Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. Assuming the government does make this price ceiling law, please construct a diagram that shows the impact of this law on the cable TV market, and please briefly explain the effects on market prices and quantities with supply and demand analysis. Also, if the cable TV company is worried about disgruntling customers, the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing to customers. What would be the effects of this action?

Q: The currency used by the Confederate States of America during its brief existence from 1861 to 1865 has become a collector's item today. The Confederate Currency supply is perfectly inelastic. As the demand for the collectible increases and some of the old currency is destroyed or no longer of value as a collectible, what happens to the market price?

Q: Historically, investors have considered gold commodities to be a good investment to preserve wealth in times of inflation. If investors are no longer worried about inflation and gold demand decreases, what do you expect will happen to gold prices? How would your answer change if you learn that a recent gold mine discovery will increase the supply of gold?

Q: Suppose that due to more stringent environmental regulation it becomes more expensive for steel production firms to operate. Also, recent technological advances in plastics has reduced the demand for steel products. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of steel. Can we say with certainty that the market price for steel will fall? Why?

Q: Suppose a new discovery in computer manufacturing has just made computer production cheaper. Also, the popularity and usefulness of computers continues to grow. Use Supply and Demand analysis to predict how these shocks will affect equilibrium price and quantity of computers. Is there enough information to determine if market prices will rise or fall? Why?

Q: By 2020, automobile market analysts expect that the demand for electric autos will increase as buyers become more familiar with the technology. However, the costs of producing electric autos may increase because of higher costs for inputs (e.g., rare earth elements), or they may decrease as the manufacturers learn better assembly methods (i.e., learning by doing). What is the expected impact of these changes on the equilibrium price and quantity for electric autos? A) Unambiguously higher equilibrium price and quantity B) Unambiguously higher price, and equilibrium quantity may be higher or lower C) Unambiguously higher quantity, and equilibrium price may be higher or lower D) We cannot form any unambiguous expectations for either price or quantity

Q: Over the next few years, several newly constructed office blocks will become available at the World Trade Center site. As well, economists expect the New York economy will continue to exhibit modest growth. What is the expected outcome for the office space market in downtown Manhattan? A) Unambiguously higher equilibrium rental rates and quantity B) Unambiguously lower equilibrium rental rates and quantity C) Unambiguously higher rental rates, and equilibrium quantity could be higher or lower D) Unambiguously higher equilibrium quantity, and equilibrium rental rates could be higher or lower

Q: If we plot the quantity of aluminum ore mined per year on the horizontal axis and the real annual price of aluminum ore on the vertical axis, we find that the path of price-quantity combinations generally indicates lower real prices and higher quantities over time. Which of the following statements is a plausible explanation for this observed outcome? A) Aluminum supply shifted leftward faster than the aluminum demand curve shifted rightward. B) Aluminum supply shifted rightward faster than the aluminum demand curve shifted rightward. C) Aluminum supply shifted rightward and aluminum demand remained constant. D) both A and B above E) both B and C above

Q: Suppose the supply of textbooks is upward sloping and shifts leftward due to higher ink and paper costs. Which of the following events would leave the equilibrium price of textbooks at the same level observed before the supply shift? A) Demand is perfectly elastic (horizontal). B) Demand is downward sloping and shifts leftward. C) all of the above D) none of the above

Q: In recent years, the world demand curve for copper shifted rightward due to continued economic growth in China and other emerging economies. Also, the costs of extracting the copper increased due to higher energy prices. As a result, we observed: A) higher equilibrium copper prices and unambiguously lower quantities. B) higher equilibrium copper prices and unambiguously higher quantities. C) higher equilibrium copper prices and either higher or lower quantities. D) lower equilibrium copper prices and either higher or lower quantities.

Q: The effect of the September 11 attacks on the World Trade Center on the market for office space in downtown Manhattan was that both the equilibrium price and the equilibrium quantity fell. What is the most likely explanation for this? A) Supply and demand both shifted left, and the magnitude of the demand shift was greater. B) Supply and demand both shifted left, and the magnitude of the supply shift was greater. C) Supply shifted left, demand shifted right, and the magnitude of the demand shift was greater. D) Supply shifted left, demand shifted right, and the magnitude of the supply shift was greater.

Q: After the September 11, 2001 attacks on the World Trade Center, the supply of downtown office space in Manhattan was dramatically reduced. Forecasters predicted that the equilibrium price would rise, but in fact the price fell. What are some factors that could explain the fall in the equilibrium price, which the forecasters failed to take into account? A) Demand for office space fell due to quality-of-life concerns. B) The economic slowdown caused demand for office space to fall. C) both A and B D) none of the above

Q: In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. Under what circumstances will the equilibrium level of output of dental care increase? A) If supply shifts more than demand. B) If demand shifts more than supply. C) If both demand and supply shift by the same magnitude. D) If supply and demand both decrease.

Q: In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. Under what circumstances will the equilibrium level of output of dental care remain the same? A) If supply shifts more than demand. B) If demand shifts more than supply. C) If both demand and supply shift by the same magnitude. D) If supply and demand shift in the same direction.

Q: In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. What is the effect of the BBP on the equilibrium price of dental care? A) It unambiguously increases. B) It unambiguously decreases. C) It increases only if supply shifts more than demand. D) It increases only if demand shifts more than supply.

Q: In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. What is the effect of the BBP on the market for dental care? A) Both supply and demand shift to the right. B) Both supply and demand shift to the left. C) Supply shifts to the right, and demand shifts to the left. D) Supply shifts to the left, and demand shifts to the right. E) none of the above

Q: In 1992, the Occupational Safety and Health Authority passed the Bloodborne Pathogens Standard (BBP), which regulates dental office procedures. This regulation is designed to minimize the transmission of infectious disease from patient to dental worker. The effect of this regulation was both to increase the cost of providing dental care and to ease the fear of going to the dentist as the risk of contracting an infectious disease. What is the effect of the BBP on the market for dental care? A) Only the supply curve shifts. B) Only the demand curve shifts. C) Both the demand and supply curves shift. D) Neither the demand nor supply curve shifts.

Q: Which of the following will cause the price of beer to rise? A) A shift to the right in the demand curve for beer B) A shift to the left in the supply curve of beer C) both A and B D) none of the above

Q: We observe that both the price of and quantity sold of golf balls are rising over time. This is due to: A) continual improvements in the technology used to produce golf balls. B) increases in the price of golf clubs over time. C) decreases in membership fees for country clubs with golf facilities. D) more stringent professional requirements on the quality of golf balls requiring producers to use more expensive raw materials.

Q: From 1970 to 2010, the real price of eggs decreased and the total annual consumption of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs and an unambiguous decrease in the quantity of eggs consumed? A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. B) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. C) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs. D) none of the above

Q: From 1970 to 2010, the real price of eggs decreased. Which of the following would cause an unambiguous decrease in the real price of eggs? A) A shift to the right in the supply curve for eggs and a shift to the right in the demand curve for eggs. B) A shift to the right in the supply curve for eggs and a shift to the left in the demand curve for eggs. C) A shift to the left in the supply curve for eggs and a shift to the right in the demand curve for eggs. D) A shift to the left in the supply curve for eggs and a shift to the left in the demand curve for eggs.

Q: From 1970 to 2010, the real price of a college education increased, and total enrollment increased. Which of the following could have caused this increase in price and enrollment? A) A shift to the right in the supply curve for college education and a shift to the left in the demand curve for college education. B) A shift to the left in the supply curve for college education and a shift to the right in the demand curve for college education. C) A shift to the left in the supply curve for college education and a shift to the left in the demand curve for college education. D) none of the above

Q: Which of the following would cause an unambiguous decrease in the real price of DVD players? A) A shift to the right in the supply curve for DVD players and a shift to the right in the demand curve for DVD players. B) A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players. C) A shift to the left in the supply curve for DVD players and a shift to the right in the demand curve for DVD players. D) A shift to the left in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.

Q: The daily demand for hotel rooms on Manhattan Island in New York is given by the equation QD = 250,000 - 375P. The daily supply of hotel rooms on Manhattan Island is given by the equation QS = 15,000 + 212.5P. Diagram these demand and supply curves in price and quantity space. What is the equilibrium price and quantity of hotel rooms on Manhattan Island?

Q: The inverse demand curve for product X is given by: PX = 25 - 0.005Q + 0.15PY, where PX represents price in dollars per unit, Q represents rate of sales in pounds per week, and PY represents selling price of another product Y in dollars per unit. The inverse supply curve of product X is given by: PX = 5 + 0.004Q. a. Determine the equilibrium price and sales of X. Let PY = $10. b. Determine whether X and Y are substitutes or complements.

Q: Suppose Congress passes a law that states the price of gasoline may not exceed $6 per gallon (but may be lower). If the current price of gasoline is less than $6, what impact does this law have on the current price and quantity of gasoline in the US market? A) There is a shortage of gasoline B) There is a surplus of gasoline C) Quantity supplied currently equals quantity demanded, but a surplus is possible at prices above $6 D) The law currently has no impact, and the market clears at the equilibrium price

Q: Which of the following statements is NOT true? A) Unemployment in the US economy represents an excess demand for labor. B) A surplus may be reduced by shifting the demand curve rightward. C) A surplus may be reduced by shifting both the supply and demand curves. D) A shortage may be reduced by shifting the supply rightward.

Q: Suppose there is currently a surplus of wheat on the world market. The problem of excess supply may be removed from the market by: A) lowering the market price. B) shifting the supply curve leftward. C) shifting the demand curve leftward. D) Both A and B are plausible actions.

Q: The current market price for good X is below the equilibrium price, and then the demand curve for X shifts rightward. What is the likely outcome of the demand shift? A) The surplus increases. B) The surplus decreases. C) The shortage increases. D) The shortage decreases.