A Severe Drought Hits a Country and Reduces Farm Output

question 81

Multiple Choice

A severe drought hits a country and reduces farm output by 50%.This will impact:

• A) short-run aggregate supply.
• B) short-run and long-run aggregate supply.
• C) long-run aggregate supply.
• D) aggregate demand.
• E) short-run aggregate supply and aggregate demand.

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Definitions:

Economic Profits

The excess of a firm's total revenues over its opportunity costs, reflecting profitability beyond the normal return on investment.

Competitive Price-searcher Market

A market in which firms have some control over prices because their products are differentiated, but they still face competition and must search for competitive pricing strategies.

Zero Economic Profit

A situation where a firm's total revenue equals its total costs, including both explicit and implicit costs, indicating no supernormal profit.

Marginal Revenue

The additional income gained from selling one more unit of a good or service.