Corn is produced in a perfectly competitive market. The demand for ethanol increases. This will cause the individual corn farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

The demand for ethanol increases, which in turn increases the demand for corn (used to produce ethanol), leading to higher prices and marginal revenue for corn farmers. Consequently, to maximize profits, farmers will increase their level of output.

Corn Is Produced in a Perfectly Competitive Market