In March 2012,the State of California Started Requiring That All

question 153

Multiple Choice

In March 2012,the state of California started requiring that all packaging for food and drink with the additive 4-methylimidazole (4-MI) be clearly labeled with a cancer warning.Because of this,both Pepsi and Coke changed their formulas to eliminate 4-MI as an ingredient.If Pepsi and Coke did NOT change their formulas,holding all else constant,what do you think would have happened to the demand for these goods,assuming Pepsi and Coke were in a competitive market?

• A) The demand curve for both Pepsi and Coke would have shifted to the right, causing the price of both products to decrease and the profits for the companies to fall.
• B) The demand curve for Pepsi and Coke would have remained unchanged, but the price of both products would have decreased and the profits for the companies would have fallen.
• C) The demand curve for Pepsi and Coke would have decreased, but the prices and profits would not have changed.
• D) The demand curve for only one of them would change because Pepsi and Coke are substitutes.
• E) The demand curve for Pepsi and Coke would have shifted to the left, causing the price of both products to decrease and the profits for both companies to fall.

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Definitions:

Departmentation

The process of dividing an organization into distinct departments, allowing for specialized functions and management.

Configurations

Arrangements or sets of components or elements that are organized in a particular manner or structure.

Task Environment

Comprises the immediate external factors and entities that directly affect an organization's operations, including suppliers, customers, competitors, and regulatory agencies.

Constellation of Firms

A network or group of companies that operates together in some capacity, often sharing resources or working toward common goals, without necessarily being legally bound to each other.