Which factor is MOST likely to shift the supply of milk to the right?
A) a tax on each litre of milk produced
B) an increase in household income,milk being a normal good
C) a decrease in the price of feed given to dairy cows
D) the bankruptcy of many small dairy farms

Question

Quizplus · Accepted Answer

A decrease in the price of feed given to dairy cows would reduce the cost of milk production, leading to higher profits for farmers at any given price of milk. As a result, they would be willing and able to supply more milk at each price level. This would shift the supply curve to the right. A tax on milk production (A) would increase the cost of production and reduce profits, leading to a leftward shift in supply. An increase in household income (B) would likely increase demand for milk, leading to a higher equilibrium price but not necessarily a change in supply. The bankruptcy of small dairy farms (D) would decrease the number of suppliers and reduce the overall quantity of milk supplied, also leading to a leftward shift in supply.

Which Factor Is MOST Likely to Shift the Supply of Milk