Consider the Market for Potato Chips, Which Is Currently in Equilibrium

question 76

Multiple Choice

Consider the market for potato chips, which is currently in equilibrium. Now, suppose that two events happen simultaneously: (1) a new technology is invented that allows potato chip makers to produce potato chips at a lower cost and (2) the price of pretzels (a substitute in consumption) rises. What effect might these events have on the market for cupcakes?Supply will increase.Demand will increase.The change in equilibrium price cannot be determined.The change in equilibrium quantity cannot be determined.

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

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Definitions:

Initial Margin

The upfront collateral required to open a position in the futures or derivatives market.

Shares

Units of ownership interest in a corporation or financial asset, representing a portion of the company's capital.

Initial Margin

The portion of the purchase price that an investor must deposit when buying securities on margin.

Purchase GM Stock

The action of buying shares in General Motors Company, an American multinational corporation that designs, manufactures, markets, and distributes vehicles and vehicle parts.