An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds.As a result,farmers face the largest crop harvest in decades.Which answer below explains how a farm could actually go bankrupt under this scenario.

Question

Quizplus · Accepted Answer

A positive supply shock in a market with an inelastic demand curve (option B) could lead to a decrease in total revenue for farmers. This is because the decrease in price from the increased supply may not be enough to stimulate enough additional demand to offset the increase in quantity supplied. In addition, option C explains that an inelastic demand curve could lead to a decrease in revenue because the increase in quantity supplied leads to a larger decrease in price than the increase in quantity demanded. Therefore, options B and C together provide the best explanation for how a farm could go bankrupt despite a positive supply shock.

An Agricultural Corn Market Faces a Positive Supply Shock Due