All Shredded Wheat Producers Have Decided to Add a New

question 57

Multiple Choice

All shredded wheat producers have decided to add a new ingredient, the "crunch enhancer" to shredded wheat. Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that it costs more to produce and consumers like it better?

• A)The supply and demand curves both shift rightward.
• B)The supply curve shifts rightward and the demand curve remains unchanged.
• C)The supply curve shifts leftward and the demand curve shifts rightward.
• D)The supply curve shifts leftward and the demand curve remains unchanged.
• E)Neither curve changes but a movement occurs up along the demand curve and a movement occurs up along the supply curve.

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Definitions:

Purchase Discounts

A reduction in the price paid for goods or services, often granted by the seller as an incentive for early payment.

Freight-In

Freight-in concerns the shipping costs of receiving goods to be sold or used in production, added to the cost of purchased inventory.

Sales Returns and Allowances

Concessions made by the seller, including refunds and reductions in the original selling price for returned goods or deficiencies.

Operating Expenses

Expenses incurred from a company's primary business activities, excluding cost of goods sold, such as rent, salaries, and utility bills.