Which of the Following Statements Is TRUE

question 107

Multiple Choice

Which of the following statements is TRUE?
I. If the United States bans the importation of bananas, consumer surplus will decrease.
II. If the United States bans the importation of bananas, producer surplus will decrease.
III. If the United States bans the importation of bananas, it will produce bananas at a cost exceeding their world purchase price.

• A) I, II, and III
• B) I and II only
• C) I and III only
• D) II and III only

---

Definitions:

Substitution Effect

The substitution effect occurs when consumers replace more expensive items with less costly alternatives, holding utility constant.

Price

The amount of money required to purchase a good or service, typically determined by supply and demand dynamics in the market.

Claret

A term predominantly used in Britain to refer to red wines from the Bordeaux region of France.

Demand Function

A mathematical representation that describes the relationship between the quantity of a good that consumers are willing and able to purchase and its price.