An Increase in the Demand for a Product and a Reduction

question 185

Multiple Choice

An increase in the demand for a product and a reduction in its costs of production would

• A) decrease the profits of producers.
• B) encourage firms to leave an industry.
• C) encourage firms to enter an industry.
• D) cause a shortage of the product.

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Definitions:

Wine

An alcoholic beverage made from fermented grapes or other fruits, with a rich history and variety depending on grape type, soil, climate, and winemaking techniques.

Pizza

A popular dish of Italian origin consisting of a usually round, flattened base of leavened wheat-based dough topped with tomatoes, cheese, and often various other ingredients.

Weak Axiom

A principle in consumer choice theory stating that if a consumer prefers bundle A over bundle B when both are available, then the consumer should not prefer B over A when prices change but A and B remain affordable.

Revealed Preferences

A theory that determines preferences by observing consumer choices and behaviors rather than asking them directly.