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

-(Exhibit: Markets and Efficiency) Refer to Panel (c).Given the shift in supply from S₁ to S₂, which of the following statements is (are) true?
A) The rising price tells consumers that the marginal benefit of apples is falling.
B) The marginal benefit of consuming the same amount of apples at a higher price is more than the marginal costs.
C) Consumers cut back on their consumption of apples.
D) All of the above are true.

Question

Use the following to answer question(s): Markets and Efficiency
 
-(Exhibit: Markets and Efficiency) Refer to Panel (c).Given the shift in supply from S₁ to S₂, which of the following statements is (are) true?
A) The rising price tells consumers that the marginal benefit of apples is falling. 
B) The marginal benefit of consuming the same amount of apples at a higher price is more than the marginal costs. 
C) Consumers cut back on their consumption of apples. 
D) All of the above are true.

Quizplus · Accepted Answer

With the shift in supply from S₁ to S₂, the equilibrium price and quantity both increase. The rising price indicates that the marginal benefit of consuming apples is rising, not falling, so statement A is false. Statement B is also false as the marginal benefit does not increase with higher price, but rather the marginal cost increases. However, statement C is true as consumers often reduce their consumption of a good when the price increases, and this is reflected in the decrease in quantity demanded from Q₁ to Q₂ in Panel (c).

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