Last Year the Price of Corn Was $3 a Bushel

question 161

Multiple Choice

Last year the price of corn was $3 a bushel and the quantity of corn demanded was 10 million bushels. This year the price of corn was $4.00 a bushel and the quantity demanded was 12 million
Bushels. Is this evidence that the law of demand does not apply to corn?

• A) Yes, because there is a direct relationship between the price of corn and the quantity supplied.
• B) Yes, because there is an inverse relationship between the price of corn and the quantity demanded.
• C) No, because the other-things-equal assumption was violated over the two-year period.
• D) No, because the evidence indicates that there is a shortage of corn.

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Definitions:

Marginal Cost

The cost implicated in generating an added unit of a product or service.

Efficient Allocation

The distribution of resources in a way that maximizes the net benefit received by an economy.

Allocative Efficiency

A state of the economy where resources are apportioned in a way that maximizes the overall benefit to society.

Productive Efficiency

A state where an economy or entity cannot produce more of one good without producing less of another, utilizing all resources in the best possible way without waste.