A Technological Improvement Lowers the Cost of Producing Coffee

question 428

Multiple Choice

A technological improvement lowers the cost of producing coffee. At the same time, consumersʹ preferences for coffee increase. The equilibrium price of coffee will

• A) fall.
• B) remain the same.
• C) rise.
• D) rise, fall, or stay the same, depending on the relative size of the shifts in the demand and supply curves.

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Definitions:

Cost of Goods Sold

The financial charges directly linked to the fabrication of products sold by a company, involving both materials and labor input.

Net Income

The profit a company retains after all expenses and taxes have been removed from its revenue.

Inventory

A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold.

Perpetual Inventory Method

An inventory management system where updates are made continuously to record sales and purchases instantly, maintaining constant and accurate inventory records.