All Grapefruit Juice Producers Have Decided to Blend Tangerine Juice

question 59

Multiple Choice

All grapefruit juice producers have decided to blend tangerine juice with the grapefruit juice. This blend results in a higher cost of production, but studies show that consumers prefer the taste of the blend to straight grapefruit juice. What will happen to the equilibrium price and quantity of the new "blended" grapefruit juice now that it costs more to produce but consumers like it better?

• A) The price rises and the quantity increases.
• B) The price falls and the quantity increases.
• C) The effect on the price is uncertain but the quantity increases.
• D) The price rises, but the effect on the quantity is uncertain.

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