Suppose the Market for Sprouts Is in Long-Run Equilibrium

question 8

Multiple Choice

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if an E. coli outbreak reduces the demand for sprouts?

• A) The marginal cost curve will shift downward for each producer, leaving prices unchanged.
• B) The market price of sprouts will fall, causing each firm to produce fewer sprouts.
• C) Existing firms will expand output to make up for the decrease in demand.
• D) The marginal cost curve will shift upward for each producer, causing prices to rise and profits to fall.

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Definitions:

Production Orders

Production orders are formal instructions or commands to start the manufacture of a specific quantity of products at a certain time, detailing materials, equipment, and departments involved.

Product Costs

Product costs are the costs directly associated with the manufacturing of goods, including materials, labor, and overhead.

Period Costs

These are costs that are not directly tied to production and are expensed in the period they are incurred, such as selling, general, and administrative expenses.

Factory Overhead

All indirect costs associated with manufacturing, such as indirect labor, maintenance, and utilities, not directly tied to a specific product.