The cost of producing cigarettes in the U.S. has increased and at the same time, more and more Americans are choosing to not smoke cigarettes. Which of the following best explains the effect of these events in the cigarette market?
A) The supply curve has shifted to the right and the demand curve has shifted to the left. As a result there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has been an increase in the equilibrium quantity and an uncertain effect on the equilibrium price.
C) Both the supply and demand curves have shifted to the left. As a result, there has been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.
D) The supply curve has shifted to the right and the demand curve has shifted to the left. As a result, there has been an increase in the equilibrium price and an uncertain effect on the equilibrium quantity.

Question

Quizplus · Accepted Answer

The increased cost of production indicates a shift in the supply curve to the left, while the decreasing demand is a shift in the demand curve to the left. Therefore, both curves have shifted to the left. This would result in a decrease in the equilibrium quantity and an uncertain effect on the equilibrium price.

The Cost of Producing Cigarettes in the U