Suppose that the price of doughnuts decreases. Given that doughnut holes are a by-product of producing doughnuts, one would expect:
A)the supply of doughnut holes to decrease.
B)the supply of doughnuts to decrease.
C)the supply of doughnut holes to increase.
D)the supply of doughnuts to increase.

Question

Quizplus · Accepted Answer

A reduction in the price of doughnuts will lead to fewer doughnuts supplied. Since doughnut holes are produced at the same time as doughnuts, there will be fewer doughnut holes supplied at every price.

Suppose That the Price of Doughnuts Decreases