A bumper crop of apples can lead to sharply lower market prices and a decline in earned farm income primarily because

Question

Quizplus · Accepted Answer

A bumper crop of apples leads to an increase in supply in the market, causing the market price to decrease. If the demand for apples is price-inelastic, a decrease in price would not lead to a significant increase in quantity demanded, meaning that the revenue earned by the farmers would decrease. Therefore, option A is the correct choice. Option B is incorrect because an increase in foreign exports would result in a decrease in supply, which would lead to an increase in market price. Option C is incorrect because a negative income elasticity of demand would mean that a decrease in income would lead to an increase in demand, reducing the impact of the bumper crop on farm income. Option D is incorrect because the demand curve faced by individual apple farmers is relatively small compared to the overall market, which would make it more elastic rather than inelastic.

A Bumper Crop of Apples Can Lead to Sharply Lower