Assume that an economy producing two products, skateboards and in-line skates, i

Question

Assume that an economy producing two products, skateboards and in-line skates, is initially in equilibrium, and that skateboards and in-line skates are substitutes. If consumer preferences shift away from skateboards and toward in-line skates, which of the following will NOT occur? (A)In the short run, firms producing skateboards will incur losses. (B)In the short run, firms producing in-line skates will earn a profit (C)Additional capital will begin to flow into in-line skates production in the long run (D)Additional capital will begin to flow into skateboard production in the long run

Explanation / Answer

Assume that an economy producing two products, skateboards and in-line skates, is initially in equilibrium, and that skateboards and in-line skates are substitutes. If consumer preferences shift away from skateboards and toward in-line skates, which of the following will NOT occur? Additional capital will begin to flow into skateboard production in the long run is correct so it is (D)

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