Consider a Market for Coffee That Is Initially in Equilibrium

question 102

Multiple Choice

Consider a market for coffee that is initially in equilibrium.If tea harvest is bad in a particular year,then identify the most likely impact on the equilibrium price and quantity of coffee.

• A)The price of coffee will increase,while the quantity of coffee will decrease.
• B)Both the price and the quantity of coffee will increase.
• C)The price of coffee will decrease while the quantity of coffee will increase.
• D)Both the price and the quantity of coffee will decrease.
• E)There will be no impact on the equilibrium price and quantity of coffee.

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Definitions:

Fixed Factory Overhead

The consistent, non-variable expenses incurred by a manufacturing plant, which are required to maintain the production process but do not fluctuate with the level of output.

Operating Expense

Costs associated with the day-to-day running of a business, such as rent, utilities, and salaries, but excluding the cost of goods sold.

Normal Selling Price

The regular price at which a good or service is typically sold, excluding any discounts or promotional offers.

Demand-Based Method

A method of price setting based on the demand for the product.