Suppose this coming winter France will have unusually bad weather, and that next year's wine crop will be substantially reduced. Select the best statement.
A)The French wine supply will increase as price rises.
B)If the demand for French wine is elastic, wine producers will experience an increase in total revenue.
C)The initial change in the market will create a surplus of French wine.
D)In the final equilibrium, price and quantity will be higher.
E)None of the above

Question

Quizplus · Accepted Answer

None of the statements are accurate predictions. The reduction in the wine supply may lead to higher prices, but it will not necessarily create a surplus in the market. The impact on total revenue will depend on the price elasticity of demand, but it cannot be assumed that it will increase. The final equilibrium in the market cannot be predicted solely based on the information provided. Therefore, option E is the best choice.

Suppose This Coming Winter France Will Have Unusually Bad Weather