An Increase in the Demand for Lobster Due to Changes

question 152

Multiple Choice

An increase in the demand for lobster due to changes in consumer tastes,accompanied by a decrease in the supply of lobster as a result of bad weather reducing the number of fishermen trapping lobster,will result in

• A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price.
• B) an increase in the equilibrium price of lobster and no change in the equilibrium quantity.
• C) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
• D) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease.

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Definitions:

Benefits-Received Principle

A taxation principle where taxes are allocated according to the level of benefits received by the taxpayer.

Redistribution

The process by which income and wealth are reallocated across society, often through taxation and government spending to reduce economic inequalities.

Federal Government Outlays

Refers to the total spending by the federal government, including spending on goods and services, transfer payments, and interest on the debt.

Import Quota

A limit set by a government on the quantity or value of certain goods that can be imported into a country over a specified time period.