A drought destroys much of the grape crop. As a result, consumer surplus in the market for wine:
A) decreases.
B) increases.
C) remains unchanged.
D) depends on the deadweight loss.

Question

Quizplus · Accepted Answer

A drought that destroys much of the grape crop will cause a decrease in the supply of wine in the market. This reduction in supply is likely to lead to an increase in the price of wine. As a result, consumers lose some of their consumer surplus, as they have to pay a higher price for the same quantity of wine. Therefore, consumer surplus will decrease.

A Drought Destroys Much of the Grape Crop