On August 5,2003,a Tragic Fire Destroyed a Large Jim Beam

question 59

Multiple Choice

On August 5,2003,a tragic fire destroyed a large Jim Beam whiskey factory in Kentucky.Assume that the U.S.market for whiskey is perfectly competitive,and that the market was originally in long run equilibrium.What would be the effects of such a whiskey factory fire?

• A)An increase in supply would cause a reduction in price,which would then lead to entry of firms.
• B)A decrease in supply would cause an increase in price,which would then lead to entry of firms.`
• C)An increase in supply would cause an increase in price,which would then lead to entry of firms
• D)A decrease in supply would cause an increase in price,which would then lead to exit of firms.
• E)Price of the whiskey remains unchanged and the existing firms continue to earn zero economic profit.

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