Ec 201 Exam 2 P
- 1.
The most important concepts in economics, according to the textbook, are supply, demand, and the
- A.
idea of equilibrium.
- B.
Opportunity to barter.
- C.
Quantity of sales.
- D.
The level of prices.
Correct Answer
A. idea of equilibrium.Explanation
The idea of equilibrium is considered one of the most important concepts in economics. It refers to a state where the supply of goods or services matches the demand, resulting in a stable market. Understanding equilibrium is crucial for analyzing and predicting market behavior, as it helps determine factors such as pricing, production levels, and resource allocation. By achieving equilibrium, an economy can ensure efficiency and maximize overall welfare.Rate this question:
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- 2.
Quantity demanded:
- A.
Shows how much buyers are willing and able to buy at different prices.
- B.
Is the amount that buyers are willing and able to buy at a particular price.
- C.
Shows how much sellers are willing and able to sell at different prices.
- D.
Is the amount that sellers are willing and able to sell at a particular price.
Correct Answer
B. Is the amount that buyers are willing and able to buy at a particular price.Explanation
The correct answer is "is the amount that buyers are willing and able to buy at a particular price." This answer accurately describes the concept of quantity demanded, which refers to the specific amount of a good or service that buyers are willing and able to purchase at a given price. It highlights the relationship between price and the quantity of a product that consumers are willing to purchase, indicating that as the price increases, the quantity demanded typically decreases, and vice versa.Rate this question:
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- 3.
The demand curve for oil shows:
- A.
The quantity demanded of oil at different income levels.
- B.
The quantity demanded of oil at different oil prices.
- C.
The demand for oil at different prices of other goods.
- D.
The demand for oil when there is a surplus or shortage.
Correct Answer
B. The quantity demanded of oil at different oil prices.Explanation
The demand curve for oil shows the relationship between the price of oil and the quantity of oil that consumers are willing and able to buy at different price levels. It illustrates that as the price of oil increases, the quantity demanded decreases, and vice versa. This is because as the price of oil rises, consumers may switch to alternative energy sources or reduce their overall consumption. Conversely, as the price of oil decreases, consumers may increase their demand for oil. Therefore, the demand curve for oil represents the quantity demanded of oil at different oil prices.Rate this question:
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- 4.
(Figure: Good X) From the figure, which statement is TRUE?
- A.
At a price of $12 per unit, consumers are willing and able to purchase between 11 and 26 units of Good X.
- B.
36 units of Good X can be purchased by spending a total of $4.
- C.
At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X.
- D.
At a price of $4 per unit, consumers are willing and able to purchase 11 units of Good X.
Correct Answer
C. At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X.Explanation
At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X. This can be inferred from the figure, where the price of $6 intersects with the demand curve at the quantity of 26 units. This means that at this price, consumers are willing to buy 26 units of Good X, as indicated by the intersection point.Rate this question:
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- 5.
(Figure: Good X) From the figure, the maximum price that consumers are willing to pay for _____ units of Good X is _____ per unit.
- A.
36; $4
- B.
11; $4
- C.
36; $12
- D.
26; $4
Correct Answer
A. 36; $4Explanation
Based on the figure provided, it can be inferred that at 36 units of Good X, consumers are willing to pay a maximum price of $4 per unit.Rate this question:
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- 6.
Recall the discussion about the demand for oil in your textbook. Which of the following correctly explains why the demand curve for oil is negatively sloped? As the price of oil rises:
- A.
consumers use oil for more and varied purposes.
- B.
Consumers increasingly use oil only for those purposes without good substitutes.
- C.
Consumers have an incentive to use oil more freely.
- D.
More producers are more willing and able to produce oil.
Correct Answer
B. Consumers increasingly use oil only for those purposes without good substitutes.Explanation
As the price of oil rises, consumers increasingly use oil only for those purposes without good substitutes. This means that when the price of oil is higher, consumers are less willing to use it for purposes where there are alternative options available. They will only use oil when there are no good substitutes, leading to a decrease in the overall demand for oil.Rate this question:
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- 7.
The law of demand suggests a _____ relationship between price and _____.
- A.
Positive; quantity demanded
- B.
Positive; quantity supplied
- C.
Negative; quantity demanded
- D.
Negative;, quantity supplied
Correct Answer
C. Negative; quantity demandedExplanation
The law of demand states that there is an inverse relationship between price and quantity demanded. This means that as the price of a good or service increases, the quantity demanded decreases, and vice versa. Therefore, the correct answer is negative; quantity demanded.Rate this question:
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- 8.
(Figure: Potatoes) Refer to the figure. According to the demand curve, if the price of potatoes is $8 a pound, how many pounds are demanded?
- A.
5
- B.
50
- C.
60,000
- D.
80,000
Correct Answer
C. 60,000Explanation
According to the demand curve, when the price of potatoes is $8 a pound, the quantity demanded is 60,000 pounds. This means that at this price, consumers are willing and able to purchase 60,000 pounds of potatoes.Rate this question:
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- 9.
(Figure: Potatoes) Refer to the figure. If the price of potatoes is $8 a pound, what is the consumer surplus received?
- A.
$30,000
- B.
$60,000
- C.
$240,000
- D.
$360,000
Correct Answer
C. $240,000Explanation
The consumer surplus is the difference between the maximum price a consumer is willing to pay for a product and the actual price they pay. In this case, the consumer surplus can be calculated by finding the area of the triangle formed by the demand curve and the price line. The height of the triangle is $8 (the price of potatoes) and the base of the triangle is 30,000 pounds (the quantity demanded at that price). Therefore, the consumer surplus is (1/2) * $8 * 30,000 = $240,000.Rate this question:
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- 10.
(Table: Excel Company Survey) The table shows the results of Excel Company's market survey. If the market price of Excel computers is $1,200 each, how much total consumer surplus (in $) are the four consumers earning?
- A.
$380
- B.
$415
- C.
$345
- D.
$5,145
Correct Answer
A. $380Explanation
The total consumer surplus can be calculated by subtracting the market price from the maximum price that each consumer is willing to pay and summing up the individual surpluses. In this case, the maximum prices that the four consumers are willing to pay are $1,580, $1,615, $1,545, and $5,345. Subtracting the market price of $1,200 from each of these maximum prices gives us surpluses of $380, $415, $345, and $5,145. Summing up these individual surpluses gives us a total consumer surplus of $380.Rate this question:
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- 11.
(Table: Sweetbrand Cheesecakes) The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the most consumer surplus, if the market price of the cheesecakes is $12.50 each?
- A.
Frodo
- B.
Sam
- C.
Mary
- D.
Pippin
Correct Answer
B. SamExplanation
Sam receives the most consumer surplus because his willingness to pay is the highest among the four consumers. The consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual market price. Since Sam's willingness to pay is higher than the market price of $12.50, he will have a larger consumer surplus compared to the other consumers.Rate this question:
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- 12.
(Table: Sweetbrand Cheesecakes) The table shows the maximum consumer willingness to pay for Sweetbrand cheesecakes. Which of the four consumers receives the smallest consumer surplus, if the market price of the cheesecakes is $12.50 each?
- A.
Frodo
- B.
Sam
- C.
Mary
- D.
Pippin
Correct Answer
C. MaryExplanation
Mary receives the smallest consumer surplus because her maximum willingness to pay, as shown in the table, is $10.00. Since the market price of the cheesecakes is $12.50, Mary would have to pay more than her maximum willingness to pay, resulting in a negative consumer surplus. The consumer surplus is the difference between the maximum willingness to pay and the actual price paid, so in this case, Mary would have a negative consumer surplus of -$2.50.Rate this question:
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- 13.
(Figure: Quantity of Good X) Refer to the figure. At a price of $200, consumer surplus is:
- A.
$20,000.
- B.
$40,000.
- C.
$10,000.
- D.
$200.
Correct Answer
C. $10,000.Explanation
At a price of $200, consumer surplus is $10,000. Consumer surplus represents the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. In this case, the figure shows that at a price of $200, the quantity demanded is 50 units. The maximum price consumers are willing to pay for these 50 units can be determined by finding the area of the triangle formed by the demand curve and the price line. The area of this triangle is $20,000. However, since consumers are actually paying $10,000 ($200 per unit x 50 units), the consumer surplus is $10,000.Rate this question:
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- 14.
(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by:
- A.
$5,000.
- B.
$10,000.
- C.
$12,500.
- D.
–$25,000.
Correct Answer
C. $12,500.Explanation
As the price of Good X falls from $200 to $100, the consumer surplus increases. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. When the price decreases, consumers are able to purchase more of the good and pay less than what they were willing to. The increase in consumer surplus can be calculated by finding the area of the triangle formed by the original consumer surplus and the new consumer surplus. In this case, the increase in consumer surplus is $12,500.Rate this question:
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- 15.
A good is considered normal if demand for it ______ when income ______.
- A.
Increases; increases
- B.
Decreases; increases
- C.
Stays the same; decreases
- D.
Increases; decreases
Correct Answer
A. Increases; increasesExplanation
A good is considered normal if the demand for it increases when income increases. This means that as people's income rises, they are willing and able to purchase more of the good. This is in contrast to an inferior good, where demand decreases as income increases.Rate this question:
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- 16.
An inferior good is one that:
- A.
Is of low quality or not very durable.
- B.
Gets poor reviews from objective, independent evaluators.
- C.
No consumers are willing to buy.
- D.
Experiences decreased demand when income increases.
Correct Answer
D. Experiences decreased demand when income increases.Explanation
An inferior good is a type of product that experiences a decrease in demand when consumers' income increases. This is because as people's income rises, they tend to prefer higher-quality goods or services, which leads to a decrease in demand for lower-quality or cheaper alternatives. Therefore, the correct answer is that an inferior good experiences decreased demand when income increases.Rate this question:
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- 17.
In the diagram, which of the following factors would cause the demand curve to shift from D1 to D2?
- A.
An increase in the price of a substitute good
- B.
A decrease in the price of a complement good
- C.
An increase in the population
- D.
An increase in income if this is an inferior good
Correct Answer
D. An increase in income if this is an inferior goodExplanation
An increase in income would cause a shift in the demand curve from D1 to D2 if the good in question is an inferior good. This is because as income increases, consumers tend to shift their preferences towards higher-quality goods, causing a decrease in demand for inferior goods. As a result, the demand curve shifts to the left, from D1 to D2, reflecting the decrease in demand at each price level.Rate this question:
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- 18.
As the population of elderly in the United States increases, which service will likely see the biggest increase in demand?
- A.
Skateboard repair
- B.
Home medical care
- C.
Career training
- D.
Child day care
Correct Answer
B. Home medical careExplanation
As the population of elderly in the United States increases, the demand for home medical care is likely to see the biggest increase. This is because elderly individuals often require specialized medical care and assistance with daily activities, and many prefer to receive this care in the comfort of their own homes. Home medical care allows elderly individuals to receive personalized care from trained professionals while still maintaining their independence and familiar surroundings. Additionally, the aging population also means a higher prevalence of chronic illnesses and conditions that require ongoing medical attention, further driving the demand for home medical care services.Rate this question:
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- 19.
If the price of computers ______, the demand for printers will ______.
- A.
Increases; increase
- B.
Decreases; decrease
- C.
Decreases; not change
- D.
Increases; decrease
Correct Answer
D. Increases; decreaseExplanation
When the price of computers increases, it becomes more expensive for consumers to purchase computers. As a result, the demand for printers, which are often used in conjunction with computers, decreases. This is because consumers are less likely to buy printers if they cannot afford the computers to go along with them. Therefore, the increase in the price of computers leads to a decrease in the demand for printers.Rate this question:
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- 20.
A local university decides to double its enrollment over the next five years in order to increase tuition revenue. Which of the following would most likely occur in the market for rental housing in the surrounding community?
- A.
A decrease in the price of rental housing
- B.
An increase in the demand for rental housing
- C.
A decrease in the supply of rental housing
- D.
A population change leads to a change in quantity demanded, not demand.
Correct Answer
B. An increase in the demand for rental housingExplanation
As the local university doubles its enrollment over the next five years, there will be an increase in the number of students needing housing in the surrounding community. This increase in the student population will lead to a higher demand for rental housing in the area. With more students looking for housing, landlords will have more potential tenants, giving them the ability to charge higher rents. Therefore, the most likely outcome in the market for rental housing in the surrounding community is an increase in the demand for rental housing.Rate this question:
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- 21.
Which of the following would cause the demand for hot dog buns to increase?
- A.
A fall in the price of hot dog buns
- B.
A fall in the price of hot dogs
- C.
A rise in the price of hot dogs
- D.
A rise in the price of hot dog buns
Correct Answer
B. A fall in the price of hot dogsExplanation
A fall in the price of hot dogs would cause the demand for hot dog buns to increase because hot dogs and hot dog buns are complementary goods. When the price of hot dogs falls, people are more likely to buy hot dogs, which in turn increases the demand for hot dog buns to accompany the hot dogs. This is because consumers typically purchase both items together, so a decrease in the price of hot dogs encourages more consumption of hot dogs and subsequently increases the demand for hot dog buns.Rate this question:
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- 22.
Refer to the figure. A vertical reading of the figure indicates that:
- A.
At a price higher than $40, the quantity supplied drops to zero.
- B.
At prices of $40 or less, suppliers are willing to sell at least 500 units
- C.
At a price of $40 per unit, suppliers are willing and able to sell 500 units.
- D.
At a price lower than $40, the quantity supplied drops to zero.
Correct Answer
C. At a price of $40 per unit, suppliers are willing and able to sell 500 units.Explanation
The figure shows a supply curve, which represents the relationship between the price of a good and the quantity supplied by suppliers. According to the figure, at a price of $40 per unit, the quantity supplied is 500 units. This means that suppliers are both willing and able to sell 500 units at this price. The figure does not provide information about prices higher than $40 or prices lower than $40, so we cannot make any conclusions about the quantity supplied at those price levels.Rate this question:
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- 23.
(Figure: Bananas) Refer to the figure. If the price of bananas is $10 a pound, which number is closest to the number of pounds that suppliers will supply?
- A.
5
- B.
50
- C.
60,000
- D.
80,000
Correct Answer
D. 80,000 -
- 24.
(Figure: Bananas) Refer to the figure. If the price of bananas is $2 a pound, how many pounds of bananas will suppliers supply?
- A.
0
- B.
1
- C.
10
- D.
10,000
Correct Answer
A. 0Explanation
Suppliers will supply 0 pounds of bananas because at a price of $2 per pound, there is no incentive for them to supply any bananas. The cost of production and transportation would likely exceed the price they would receive, resulting in no supply.Rate this question:
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- 25.
(Figure: Producer Surplus) Refer to the figure. What is the producer surplus at a price of $2 per unit?
- A.
$5
- B.
$6
- C.
$10
- D.
$20
Correct Answer
A. $5Explanation
The producer surplus at a price of $2 per unit is $5. This can be determined by finding the area of the triangle above the supply curve and below the price line. In this case, the triangle has a base of 2 units (the quantity at a price of $2) and a height of $5 (the difference between the equilibrium price of $2 and the minimum supply price of $7). The area of the triangle is calculated as 1/2 * base * height, which equals 1/2 * 2 * 5 = $5. Therefore, the producer surplus at a price of $2 per unit is $5.Rate this question:
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- 26.
(Figure: Producer Surplus) Refer to the figure. What is the change in producer surplus if the price rises from $2 to $3 per unit?
- A.
$5
- B.
$10
- C.
$15
- D.
$20
Correct Answer
C. $15Explanation
The change in producer surplus is $15. This can be determined by calculating the area of the triangle formed by the original producer surplus at a price of $2 per unit and the new producer surplus at a price of $3 per unit. The base of the triangle is the change in quantity supplied, which is 5 units, and the height of the triangle is the change in price, which is $1. Therefore, the change in producer surplus is equal to (1/2) * 5 * $1 = $15.Rate this question:
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- 27.
Which of the following choices contains only factors that cause the supply curve to shift to the right?
- A.
a fall in production costs, a rise in technology, an increase in taxes on output
- B.
A fall in tastes and preferences for the product, economic growth, and a rise in technology
- C.
A decrease in taxes on production, a fall in subsidies on production, a rise in costs of production
- D.
A rise in technology, a fall in the costs of production, a fall in taxes on output
Correct Answer
D. A rise in technology, a fall in the costs of production, a fall in taxes on outputExplanation
Factors that cause the supply curve to shift to the right are those that increase the quantity supplied at each price level. In this case, a rise in technology allows for more efficient production, reducing costs and increasing the quantity supplied. A fall in the costs of production also lowers the overall expenses, leading to an increase in supply. Lastly, a fall in taxes on output reduces the burden on producers, allowing them to supply more at each price level.Rate this question:
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- 28.
An increase in supply refers to:
- A.
A rightward shift of the supply curve.
- B.
A leftward shift of the supply curve.
- C.
An upward movement along the supply curve.
- D.
A downward movement along the supply curve.
Correct Answer
A. A rightward shift of the supply curve.Explanation
An increase in supply refers to a rightward shift of the supply curve. This means that there is an increase in the quantity of goods or services supplied at each price level. It indicates that producers are willing and able to supply a larger quantity of goods or services at every price point. This can be due to factors such as technological advancements, lower production costs, or an increase in the number of producers in the market. As a result, the supply curve shifts to the right to reflect the increased quantity supplied at each price level.Rate this question:
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- 29.
The supply curve illustrates:
- A.
The relationship between the cost of production and price.
- B.
The relationship between the quantity supplied and the price of a good.
- C.
The total cost of producing a good.
- D.
The willingness to produce a good if the technology to produce it becomes available.
Correct Answer
B. The relationship between the quantity supplied and the price of a good.Explanation
The supply curve illustrates the relationship between the quantity supplied and the price of a good. It shows how the quantity supplied by producers changes as the price of the good changes. As the price increases, producers are willing to supply more of the good, resulting in a higher quantity supplied. Conversely, as the price decreases, producers are willing to supply less, resulting in a lower quantity supplied. The supply curve is upward sloping, indicating a positive relationship between price and quantity supplied.Rate this question:
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- 30.
(Figure: Supply Shift) What would cause the supply curve to shift from S1 to S2 as shown in the diagram?
- A.
An increase in taxes on firms' output
- B.
An increase in the price of inputs used to produce the output
- C.
A decrease in the number of firms that produce the output
- D.
A decrease in the wages paid to union workers who produce the output
Correct Answer
D. A decrease in the wages paid to union workers who produce the outputExplanation
A decrease in the wages paid to union workers who produce the output would cause the supply curve to shift from S1 to S2. When wages paid to union workers decrease, the cost of production for firms decreases. This leads to lower production costs and an increase in supply. As a result, the supply curve shifts to the right, from S1 to S2, indicating an increase in the quantity of output that firms are willing and able to produce at each price level.Rate this question:
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- 31.
(Figure: Supply Shift) What would cause the supply curve to shift from S2 to S1 as shown in the diagram?
- A.
A decrease in the opportunity costs of producing the good
- B.
A decrease in the costs of production
- C.
An increase in the prices of inputs used in production
- D.
An expected decrease in the future price of the good
Correct Answer
C. An increase in the prices of inputs used in productionExplanation
An increase in the prices of inputs used in production would cause the supply curve to shift from S2 to S1. When the prices of inputs used in production increase, it becomes more expensive for producers to produce the good. As a result, they are less willing and able to supply the same quantity of the good at each price level, causing a leftward shift of the supply curve. This means that at any given price, the quantity supplied decreases, leading to a decrease in supply.Rate this question:
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- 32.
(Figure: Supply Shifts) In the figure, the initial supply curve is S1. If producers form expectations that the price will be lower in the near future, S1 will:
- A.
Shift to S2 now.
- B.
Shift to S3 now.
- C.
Not shift now.
- D.
Only shift to S3 in the future.
Correct Answer
B. Shift to S3 now.Explanation
When producers form expectations that the price will be lower in the near future, they will anticipate a decrease in demand for their product. As a result, they will reduce their current supply in order to avoid holding excess inventory. This will cause the supply curve to shift to the left from S1 to S3, indicating a decrease in supply in the present. Therefore, the correct answer is that the supply curve will shift to S3 now.Rate this question:
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- 33.
(Figure: Supply Shifts) In the figure, the initial supply curve is S1. Producers engage in market speculation with the belief that the price of the good will increase in the near future. This would be represented in the figure by shifting the:
- A.
Supply curve to S2, resulting in a lower quantity supplied at each price.
- B.
Supply curve to S2, resulting in a higher quantity supplied at each price.
- C.
Supply curve to S3, resulting in a lower quantity supplied at each price.
- D.
Supply curve to S3, resulting in a higher quantity supplied at each price.
Correct Answer
A. Supply curve to S2, resulting in a lower quantity supplied at each price.Explanation
Producers engaging in market speculation with the belief that the price of the good will increase in the near future would lead to a decrease in the quantity supplied at each price. This is because producers would hold back some of their supply in anticipation of higher prices, resulting in a lower quantity supplied. Therefore, the supply curve would shift to S2, representing a lower quantity supplied at each price.Rate this question:
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- 34.
A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.
- A.
Decreases; up and to the left
- B.
Increases; up and to the left
- C.
Decreases; down and to the right
- D.
Increases; down and to the right
Correct Answer
B. Increases; up and to the leftExplanation
When the price of soy increases, it becomes more profitable for the farmer to grow soy instead of sorghum. This means that the opportunity cost of growing sorghum increases because the farmer is giving up the potential higher profits from growing soy. As a result, the farmer is likely to shift their production towards soy and away from sorghum. This shift in production is represented by the supply curve of sorghum shifting up and to the left, indicating a decrease in the quantity supplied of sorghum.Rate this question:
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