Suppose a Positive Technological Change in the Production of Disease-Resistant

question 218

Multiple Choice

Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall.Holding everything else constant,how would this affect the market for wheat (a substitute for corn) ?

• A)The supply of wheat would increase and the equilibrium price of wheat would decrease.
• B)The demand for wheat would decrease and the equilibrium price of wheat would decrease.
• C)The demand for wheat would increase because consumers could afford to buy more wheat and corn.
• D)The demand for wheat would decrease and the equilibrium price of wheat would increase.

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Definitions:

Cost of Equity

Cost of equity refers to the return a company must offer investors to compensate for the risk they take by investing in the company's equity.

New Stock

Shares that are issued to the public for the first time through an initial public offering or as additional shares by a company.

Component Cost

Component cost refers to the cost associated with each separate element or 'component' in the process of calculating a company's Weighted Average Cost of Capital (WACC).

Debt Issue

The act of a company raising money through the sale of bonds or other fixed-income securities.