Strawberries are produced in a perfectly competitive market. Average consumer incomes decrease. This will cause the individual strawberry farmer's marginal revenue to ________ and their profit-maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

When average consumer incomes decrease, demand for strawberries will likely decrease as well, leading to a lower price for strawberries. In a perfectly competitive market, the price is equal to the marginal revenue. Therefore, the individual strawberry farmer's marginal revenue will decrease. With lower marginal revenue, the profit-maximizing level of output will also decrease, as it will not be profitable to produce as much at the lower price.

Strawberries Are Produced in a Perfectly Competitive Market