refer to the following figure(s). which of the following is false? graph (2): as supply increases…

refer to the following figure(s). which of the following is false? graph (2): as supply increases, equilibrium price remains constant. graph (1): a price ceiling set at p2 would not be effective. graph (3): as demand increases, equilibrium quantity remains constant. graph (4): as supply increases, equilibrium quantity increases.

refer to the following figure(s). which of the following is false? graph (2): as supply increases, equilibrium price remains constant. graph (1): a price ceiling set at p2 would not be effective. graph (3): as demand increases, equilibrium quantity remains constant. graph (4): as supply increases, equilibrium quantity increases.

Answer

Brief Explanations:

  1. Graph (1): A price - ceiling above the equilibrium price ($P_1$) is non - binding (not effective). Since $P_2>P_1$, the statement is true.
  2. Graph (2): With a perfectly inelastic demand curve, an increase in supply does not change the equilibrium price. The statement is true.
  3. Graph (3): With a perfectly inelastic supply curve, an increase in demand does not change the equilibrium quantity. The statement is true.
  4. Graph (4): With a perfectly inelastic demand curve, an increase in supply does not change the equilibrium quantity. The statement "As supply increases, equilibrium quantity increases" is false.

Answer:

Graph (4): As supply increases, equilibrium quantity increases.