Use the following to answer question(s): Markets and Efficiency

-(Exhibit: Markets and Efficiency) In Panel (b) demand shifted from D₁ to D₂, reflecting a change in consumer preferences.As the price changes to the new equilibrium price, some producers will:
A) find that their marginal benefit of producing apples is below their marginal cost.
B) cut back on apple production.
C) respond to the signal sent by consumers and start to produce other goods that are more valuable than apples.
D) do all of the above.

Question

Use the following to answer question(s): Markets and Efficiency
 
-(Exhibit: Markets and Efficiency) In Panel (b) demand shifted from D₁ to D₂, reflecting a change in consumer preferences.As the price changes to the new equilibrium price, some producers will:
A) find that their marginal benefit of producing apples is below their marginal cost. 
B) cut back on apple production. 
C) respond to the signal sent by consumers and start to produce other goods that are more valuable than apples. 
D) do all of the above.

Quizplus · Accepted Answer

As demand shifts, the equilibrium price changes. Some producers who were previously able to sell apples at the old equilibrium price may now find that their marginal benefit of producing apples is below their marginal cost. Therefore, they will cut back on apple production. Additionally, some producers may respond to the signal sent by consumers and start to produce other goods that are more valuable than apples. Hence, all of the above actions are possible.

Use the Following to Answer Question(s): Markets and Efficiency