Refer to the information provided in Figure 12.4 below to answer the question(s) that follow. Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0.
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, firms in sector X are now ________ and firms in sector Y are now ________.
A) breaking even; suffering losses
B) earning profits; breaking even
C) earning profits; suffering losses
D) breaking even; breaking even

Question

Refer to the information provided in Figure 12.4 below to answer the question(s) that follow.  Figure 12.4
There are two sectors in the economy, X and Y, and both are in long-run, zero-profit equilibrium at the intersections of S 0 and D 0. 
-Refer to Figure 12.4. Assume consumer preference changes toward X and away from Y. Ceteris paribus, firms in sector X are now ________ and firms in sector Y are now ________.
A) breaking even; suffering losses 
B) earning profits; breaking even 
C) earning profits; suffering losses 
D) breaking even; breaking even

Quizplus · Accepted Answer

When consumer preference shifts toward X and away from Y, demand for X increases, potentially raising its price above the cost of production and leading firms in sector X to earn profits. Conversely, demand for Y decreases, possibly causing its price to fall below the cost of production, leading firms in sector Y to suffer losses.

Refer to the Information Provided in Figure 12