Refer to Scenario 3

question 255

Multiple Choice

Refer to Scenario 3.2 below to answer the question(s) that follow.
SCENARIO 3.2: Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter, about 20% of the lettuce crop was destroyed by flooding.
-Refer to Scenario 3.2. If at the same time that part of the lettuce crop was destroyed, consumer income also decreased, then, ceteris paribus, in the market for lettuce this would have caused

• A) both the equilibrium price and quantity to decrease.
• B) the equilibrium price to increase and the equilibrium quantity to decrease.
• C) the equilibrium price to decrease. The equilibrium quantity could have increased, decreased, or remained the same.
• D) the equilibrium price to either increase, decrease, or remain the same and the equilibrium quantity to decrease.

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Definitions:

Damages Award

Compensation determined by a court or agreement for losses or harm suffered by a party due to another's actions or failures.

Provisions Disclosure

The requirement in financial reporting to disclose information about any significant provisions for future liabilities or charges.

Comparatives

Financial data presented alongside current figures for the purpose of comparison with previous periods.

Discount Rate

The interest rate used to discount future cash flows to present value, often applied in investment and finance to determine the present worth of future cash flows.