A pest attack destroys half of the California navel orange crop. Simultaneously, the price of kiwi fruit, a substitute for navel oranges, falls. How would you expect these two events to affect the equilibrium in the California navel orange market?
a. The demand for navel oranges would decrease but the supply would remain unchanged, resulting in a lower market equilibrium price and quantity.
b. The supply would decrease and the demand would increase, resulting in a higher market equilibrium price and an indeterminate change in market equilibrium quantity.
c. Both supply and demand would decrease, resulting in a decrease in equilibrium quantity and an indeterminate change in price.
d. Both supply and demand would increase, resulting in an increase in equilibrium quantity and an indeterminate change in price.
c
You might also like to view...
A perfectly competitive firm maximizes its profit by
A) setting its price so that it exceeds the marginal revenue. B) choosing to produce the quantity that sets MC equal to MR. C) cutting wages. D) manipulating demand.
According to Okun's law, an increase in the unemployment rate will cause ________ in the level of employment and ________ in the level of output
A) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease