A worldwide hops (a flowers used in brewing) shortage will make stouts, ales and other specialty microbrews more pricy in 2008. A triple whammy of bad weather in Europe, an increase in the price of barley and a decrease in hops production in the U.S. has led to a price increase of 20 percent for the most widely grown varieties, to 80 percent for specialty hops. What is the effect of this hops shortage on a microbrewery's cost curves?

Question

Quizplus · Accepted Answer

The shortage in hops will increase the cost of inputs needed for the production of the specialty microbrews, leading to an increase in variable costs. As a result, short-run variable costs would increase. However, the other cost curves (short-run fixed costs, short-run total costs, and short-run average variable costs) would not be directly affected by the hops shortage.

A Worldwide Hops (A Flowers Used in Brewing) Shortage Will