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

question 106

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 formula to eliminate 4-MI as an ingredient.If Pepsi and Coke did NOT change their formula,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:

Schedule

A plan that outlines tasks, activities, or events, including their intended start and finish times, in a structured sequence.

Current Ratio

A financial metric indicating how well a company can fulfill its immediate liabilities, using the formula of dividing its current assets by its current liabilities, specifically for debts due within one year.

Account Balances

The amounts of money present in an account at a particular moment, reflecting all transactions.

Long-term Notes Payable

Loans or credit lines that are to be repaid over a period longer than one year.