When a shortage is eliminated in a market, which of the following occurs?

• A. Producers reduce production to avoid excess supply.
• B. The market price falls below the equilibrium price.
• C. The quantity supplied increases to equal the quantity demanded at the equilibrium price.
• D. The quantity demanded becomes greater than the quantity supplied.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a shortage: A shortage occurs when the quantity demanded exceeds the quantity supplied at a given price, typically below the equilibrium price.
2. Recall the definition of equilibrium price: It is the price at which the quantity demanded equals the quantity supplied, meaning the market clears with no excess demand or supply.
3. Analyze what happens when a shortage is eliminated: The market moves toward equilibrium, so the price tends to rise to the equilibrium level, encouraging producers to supply more and consumers to demand less.
4. Recognize that at equilibrium, the quantity supplied equals the quantity demanded, so the market clears without excess supply or demand.
5. Conclude that the correct outcome when a shortage is eliminated is that the quantity supplied increases to equal the quantity demanded at the equilibrium price.