Refer to the information provided in Figure 9.7 below to answer the questions that follow. Figure 9.7
-Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat, and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 13
C) D3; decrease; 10
D) D1; decrease; 0

Question

Refer to the information provided in Figure 9.7 below to answer the questions that follow.  Figure 9.7
-Refer to Figure 9.7. Suppose demand for wheat is initially D2. If the price of rice (a substitute for wheat) falls, then demand for wheat will shift to ________. This will ________ the equilibrium price of wheat, and individual profit maximizing firms will produce ________ bushels of wheat.
A) D3; increase; 15 
B) D1; increase; 13 
C) D3; decrease; 10 
D) D1; decrease; 0

Quizplus · Accepted Answer

When the price of a substitute good like rice falls, the demand for wheat will decrease, shifting the demand curve from D2 to D1. This decrease in demand will lower the equilibrium price of wheat, and individual profit-maximizing firms will produce fewer bushels, potentially down to zero if the price falls below their cost of production.

Refer to the Information Provided in Figure 9