-Refer to Figure 3 -4

Multiple Choice

-Refer to Figure 3 -4. The figure above represents the market for canvas tote bags. Assume that the market price is US$35. Which of the following statement is true?

A) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals US$25.
B) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals US$25.
C) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals US$25.
D) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals US$25.