Suppose There Is a Permanent Shift of Consumer Preferences Away

question 52

Multiple Choice

Suppose there is a permanent shift of consumer preferences away from pretzels and toward potato chips. The most likely result would be

• A) in the short run, economic losses in the potato chip market.
• B) in the long run, a fall in the supply of potato chips.
• C) in the short run, a rise in the price of pretzels.
• D) short-run profits in the potato chip market increase.

Understand the role of religious movements, particularly the Second Great Awakening, in promoting social reforms.

Understand the mechanisms and economic implications of cap-and-trade programs.

Recognize the concept and optimal quantity determination of public goods.

Appreciate the complexities and challenges in quantifying benefits for cost-benefit analysis of public goods.

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Definitions:

Ordering Costs

Expenses incurred in placing and receiving orders from suppliers, including costs related to processing and shipping.

Holding Inventory

The costs and activities associated with storing unsold goods or materials, including warehousing and insurance.

Ordering Costs

Expenses incurred in placing and receiving orders from suppliers, including costs related to the processing and handling of orders.

Carrying Costs

The total cost of holding inventory, including storage, insurance, taxes, and opportunity costs, among others.