There is a 15 percent increase in the price of lumber used by a firm that builds new homes. This causes
A)a decrease in the quantity of new homes supplied.
B)an increase in the supply of new homes.
C)an increase of the quantity supplied of new homes.
D)a decrease in the supply of new homes.

Question

Quizplus · Accepted Answer

An increase in the price of lumber will cause the firm's cost of production to increase, which will reduce their profits. As a result, the firm may decide to decrease the supply of new homes they build, leading to a decrease in the supply of new homes.

There Is a 15 Percent Increase in the Price of Lumber