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Question

When supply decreases while demand remains unchanged, then equilibrium price will ________.

A
rise
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B
fall
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C
remain unchanged
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D
be zero
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Solution

The correct option is C rise
When supply decreases and demand remains unchanged then the equilibrium price tens to rise to bring the market back to equilibrium. When there is a decrease in supply the quantity is reduced from Q1 to Q2 and because there is less quantity supplied prices will increase from P1 to P2 to bring market in equilibrium.
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