A worldwide hops (a flower used in brewing) shortage made stouts, ales and other specialty microbrews more pricy in 2008. Gayle Goshie, a hops farmer, blames overproduction for hops' previously cheap place on the agricultural market. The glut pushed many hops farmers out business, which gradually helped hops prices recover. Suppose farming hops is a perfectly competitive market. How did farmers going out of business help hops prices recover?

Question

Quizplus · Accepted Answer

In a perfectly competitive market, fewer farmers mean that there is less supply of hops in the market, causing the market supply curve to shift leftward. As a result, the equilibrium price increases, which eventually causes the remaining hops farmers to increase their production to take advantage of the higher price, gradually restoring the market equilibrium. Therefore, option A is the correct choice.

A Worldwide Hops (A Flower Used in Brewing) Shortage Made