Suppose Rice Is a Normal Good

question 174

Multiple Choice

Suppose rice is a normal good. If consumers' incomes fall, and a new technology is introduced that lowers the marginal cost of producing rice, then the equilibrium:

• A)price of rice will increase, but we cannot say for sure what will happen to the equilibrium quantity.
• B)price of rice will fall, but we cannot say for sure what will happen to the equilibrium quantity.
• C)quantity of rice will increase, but we cannot say for sure what will happen to the equilibrium price.
• D)quantity of rice will decrease, but we cannot say for sure what will happen to the equilibrium price.

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Definitions:

Rent Payment

Monetary compensation paid by a lessee to a lessor for the use of a particular property, piece of equipment, or facility.

Land Supplied

Land supplied indicates the quantity of land offered for use or development, affected by factors like pricing, zoning regulations, and market demand.

Rationing Function

The ability of market prices to allocate scarce resources efficiently among competing uses.

Incentive Function

The inducement that an increase in the price of a commodity gives to sellers to make more of it available (and conversely for a decrease in price), and the inducement that an increase in price offers to buyers to purchase smaller quantities (and conversely for a decrease in price).