Assume That the Market for Barley Is in Equilibrium and the Demand

question 62

Multiple Choice

Assume that the market for barley is in equilibrium and the demand for barley is inelastic.Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley.The drought will cause farm revenue to

• A)rise because there will be a shortage of barley.
• B)rise because the percentage decrease in quantity sold is less than the percentage increase in price.
• C)rise because the percentage increase in quantity sold is greater than the percentage increase in price.
• D)fall because of the decrease in the quantity of barley sold.

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Definitions:

Marginal Product

The additional output that is produced by using one more unit of a particular input, holding all other inputs constant.

Factor X

Factor X is a placeholder term used to denote an unknown or unspecified factor in an equation or scenario.

Production Function

A mathematical relationship expressing the maximum output that can be produced from a given set of inputs, showing the technological relationship between inputs and outputs.

Returns To Scale

The rate at which output increases as inputs are increased proportionally in the production process.