When an Unusually Bad Frost Reduces the Apple Crop in Washington

question 447

Multiple Choice

When an unusually bad frost reduces the apple crop in Washington state, the price of canned apple juice may rise immediately in supermarkets, even though the juice on the shelves was made from last year's plentiful crop. The invisible hand theory tells us that the profit-seeking merchants who raise their prices in such situations

• A) are hurting the economy, since the juice now on the shelves was produced at a lower cost.
• B) are profiting by rationing the juice, which is now more scarce to the consumers willing to pay the most for the now more limited supply.
• C) are ignoring the motivating function of prices, which the invisible hand theory holds should be set according to the cost paid by the merchant.
• D) will not actually profit since they are ignoring a basic economic rule: Only raise prices when consumer demand increases.

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Definitions:

Medulla

(1) The inner part of an organ, such as the medulla of the kidney. Compare with cortex. (2) The most posterior part of the vertebrate brain, lying next to the spinal cord.

Cerebellum

A convoluted subdivision of the vertebrate brain concerned with coordination of muscular movements, muscle tone, and balance.

Gray Matter

Nervous tissue in the brain and spinal cord that contains cell bodies, dendrites, and unmyelinated axons. Compare with white matter

White Matter

Nervous tissue in the brain and spinal cord that contains myelinated axons. Compare with gray matter.