The Demand for Orange Juice Is Price Elastic

question 160

Multiple Choice

The demand for orange juice is price elastic. A severe frost, which destroys large quantities of oranges will

• A)lower the equilibrium price but increase total consumer spending on juice.
• B)decrease the equilibrium quantity and decrease total consumer spending on juice.
• C)decrease both the equilibrium quantity and the price of juice.
• D)raise the equilibrium price as well as total consumer spending for juice.
• E)raise the equilibrium price but leave total consumer spending for juice constant.

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Definitions:

Marginal Revenue

Marginal revenue is the additional income generated from the sale of one more unit of a product or service.

Profit Maximizing

The process or strategy of adjusting production and operations to achieve the highest possible profit from business activities.

Economic Efficiency

A situation where resources are allocated in a way that maximizes the production of goods and services at the lowest cost.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved.