All grapefruit juice producers have decided to blend tangerine juice with grapefruit juice.This blend results in a higher cost of production, but studies show that consumers prefer the taste of the blend to straight grapefruit juice.What will happen to the equilibrium price and quantity of grapefruit juice?

Question

Quizplus · Accepted Answer

The higher cost of production due to blending tangerine juice with grapefruit juice will increase the supply curve of grapefruit juice, which will shift to the left. At the same time, the preferences of consumers will increase the demand curve for grapefruit juice, which will shift to the right. The net effect on the equilibrium price and quantity is uncertain, but it is likely that the equilibrium price will rise due to the higher cost of production, while the effect on the equilibrium quantity is unclear as it depends on the relative sizes of the shifts in supply and demand curves. Therefore, choice C is the best answer.

All Grapefruit Juice Producers Have Decided to Blend Tangerine Juice