The cost of producing cigarettes in the United States has increased and at the same time, more and more Americans are choosing to not smoke cigarettes.Which of the following best explains the effect of these events in the cigarette market?
A)The supply curve has shifted to the right and the demand curve has shifted to the left. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B)Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C)Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
D)The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question

Quizplus · Accepted Answer

The increase in production costs has led to a decrease in supply, shifting the supply curve to the left. At the same time, more Americans are choosing not to smoke, leading to a decrease in demand and shifting the demand curve to the left. Therefore, both supply and demand have shifted to the left, resulting in a decrease in the equilibrium quantity. The effect on the equilibrium price is uncertain because it depends on the magnitude of the shift in supply and demand curves.

The Cost of Producing Cigarettes in the United States Has