Suppose a Tornado Levels Hundreds of Homes

question 64

Multiple Choice

Suppose a tornado levels hundreds of homes. As rebuilding begins, how might you analyze the effect this would have on the market for lumber?

• A) The demand for lumber would increase, increasing both the equilibrium price and quantity.
• B) The supply of lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
• C) The demand for lumber would increase, decreasing the equilibrium price and increasing the equilibrium quantity.
• D) The supply of lumber would decrease, increasing the equilibrium price and decreasing the equilibrium quantity.

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Definitions:

Monopsony

Monopsony describes a market situation in which a single buyer substantially controls the market as the major purchaser of goods and services.

Competitive Price

The price of a product or service determined by the supply and demand within a competitive market, ensuring no significant profit or loss.

Marginal Value Curve

A graph that shows the additional value or utility gained from consuming one more unit of a good or service.

Expenditure Curves

Graphical representations that show how changes in income affect spending.