-(Exhibit: Markets and Efficiency) Refer to Panel (c). Given the shift in supply from S₁ to S₂, which of the following statements is (are) true? A) The rising price tells consumers that the marginal benefit of apples is falling. B) The marginal benefit of consuming the same amount of apples at a higher price is more than the marginal costs. C) Consumers cut back on their consumption of apples. D) All of the above are true.

Question

Quizplus · Accepted Answer

When the supply curve shifts from S₁ to S₂, it typically indicates a decrease in supply, leading to higher prices. Consumers, facing higher prices, will likely reduce their consumption of apples, making statement C true. Statement A is incorrect because a rising price due to a supply shift does not indicate that the marginal benefit of apples is falling; it reflects a scarcity relative to demand. Statement B is also incorrect because it misinterprets the relationship between marginal cost and marginal benefit in the context of a price increase due to a supply shift.

-(Exhibit: Markets and Efficiency) Refer to Panel (C)