Suppose, ceteris paribus, that agricultural research leads to an increase in yie

Question

Suppose, ceteris paribus, that agricultural research leads to an increase in yield to citrus growers and at the same time trade negotiations between China and the U.S. worsen, closing U.S. exports to China. Which of the following statements is correct? a. The price of Florida oranges will decrease and the quantity will decrease. b. The price of Florida oranges may decrease and the quantity may decrease. c. The price of Florida oranges may decrease and the quantity may increase. d. The price of Florida oranges will decrease and the quantity may decrease. e. the price of Florida oranges may not change and the quantity may increase.

Explanation / Answer

Correct option (d).

Higher yield to oranges will increase the production and supply of oranges, so market supply will increase, leading to lower price and higher quantity. Closing US exports of oranges will lower the demand for oranges, so market demand will decrease, causing lower price and lower quantity. So, while price definitely decreases, quantity may decrease, increase or remain unchanged as a net effect.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.