A headline reads "Lumber Prices Up Sharply." In a competitive market, this situation would lead to a(n):

Question

Quizplus · Accepted Answer

The increase in lumber prices will lead to an increase in the cost of producing new homes. This increased cost will likely lead to an increase in the price of new homes. However, as the price of new homes increases, the quantity demanded will decrease, leading to a decrease in the quantity of new homes being built. Therefore, the correct choice is C: increase in the price of new homes and a decrease in the quantity of new homes.

A Headline Reads "Lumber Prices Up Sharply