A severe drought has devastated cocoa plants, causing an increase in the price of chocolate. In the market for chocolate chip cookies
A) a surplus will arise.
B) supply has decreased and price has increased.
C) quantity has decreased and price has decreased.
D) quantity demanded has increased.

Question

Quizplus · Accepted Answer

Since the drought has caused a decrease in the supply of cocoa, which is an ingredient in chocolate, the price of chocolate will increase. This increase in input costs will lead to an increase in the cost of producing chocolate chip cookies, causing a decrease in supply and an increase in price. Therefore, option B is correct. Option A is incorrect because a surplus will not arise as the decrease in supply will offset any possible excess demand. Option C is incorrect because the decrease in supply will cause a decrease in quantity and an increase in price, not a decrease in price. Option D is incorrect because nothing in the question indicates that there is an increase in demand for chocolate chip cookies.

A Severe Drought Has Devastated Cocoa Plants, Causing an Increase