Which one of the following would NOT occur if the market price was above the market-clearing price?

• A. A shortage of the good
• B. Quantity supplied exceeds quantity demanded
• C. Sellers may lower their prices to increase sales
• D. A surplus of the good

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of market-clearing price, which is the price at which quantity demanded equals quantity supplied, resulting in market equilibrium.
2. Step 2: Recognize that if the market price is set above the market-clearing price, the quantity supplied will be greater than the quantity demanded, leading to a surplus of the good.
3. Step 3: Analyze the consequences of a surplus: sellers have excess inventory and may respond by lowering prices to stimulate demand and reduce the surplus.
4. Step 4: Contrast this with a shortage, which occurs when the price is below the market-clearing price, causing quantity demanded to exceed quantity supplied.
5. Step 5: Conclude that a shortage would NOT occur if the price is above the market-clearing price, because the higher price discourages demand and encourages supply, creating a surplus instead.