Use the Information Below to Answer the Following Questions

question 188

Multiple Choice

Use the information below to answer the following questions.
Fact 3.5.1
The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed.
-Refer to Fact 3.5.1. A new study comes out, revealing that drinking Pepsi increases your ability to study. The equilibrium quantity of coffee

• A)increases.
• B)decreases.
• C)remains the same.
• D)increases or decreases depending on the slope of the supply and demand curves.
• E)increases or decreases depending on the relative shifts of the supply and demand curves.

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Definitions:

Economic Efficiency

A situation in which resources are optimally allocated to serve each individual or entity in the best way while minimizing waste and inefficiency.

Market

A system or an environment where buyers and sellers interact to trade goods, services, or financial instruments.

Free-rider Problem

A situation where individuals consume goods or services without paying for them, which typically occurs with non-excludable and non-rival public goods.

Market Resources

The assets, materials, and inputs used to produce goods and services and are made available through the market.