What is likely to happen if a producer incorrectly sets the price of its product too high?
A) A shortage (excess demand) will result, and consumers will bid the price down to equilibrium.
B) A surplus (excess supply) will result, and the additional goods in inventory will prompt the producer to lower the price.
C) A shortage (excess demand) will result, and consumers will bid the price up to equilibrium.
D) A surplus (excess supply) will result, and the additional goods in inventory will prompt the producer to restrict output until sales increase.

Question

Quizplus · Accepted Answer

If a producer sets the price of its product too high, there will be a surplus (excess supply) of goods as consumers will be less willing to buy the product at the inflated price. The additional goods in inventory will prompt the producer to lower the price to clear the excess inventory.

What Is Likely to Happen If a Producer Incorrectly Sets