Ceteris paribus,if the corn crop is 15 percent larger this year than it was last year,farmers will have to ________ the price of corn by ________ to sell the new crop.
A)raise;more than 15 percent
B)reduce;more than 15 percent
C)reduce;less than 15 percent
D)reduce;exactly 15 percent

Question

Quizplus · Accepted Answer

If the corn crop is 15 percent larger this year than it was last year, there will be more supply of corn in the market. According to the law of supply, assuming demand to be constant, increase in supply tends to decrease the equilibrium price. Thus, farmers will have to reduce the price of corn by more than 15 percent to sell the new crop. Therefore, option B is correct.

Ceteris Paribus,if the Corn Crop Is 15 Percent Larger This