Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The supply curve will shift to the left, leading to higher prices
B
The equilibrium quantity will increase as more farmers enter the market
C
The average total cost will decrease for all farmers
D
The marginal cost for producing corn will remain unchanged
Understanding the Answer
Let's break down why this is correct
Answer
When the demand for ethanol increases, more corn is needed to produce it. This higher demand leads to an increase in the price of corn, making it more valuable for farmers. As a result, farmers may decide to grow more corn to take advantage of the higher prices. This can lead to more corn being sold in the market, which might eventually stabilize or even lower prices if supply increases significantly. For example, if a farmer previously grew 100 acres of corn and now decides to plant 150 acres because of the price rise, this increase in supply could help meet the new demand for corn used in ethanol.
Detailed Explanation
When demand for corn goes up, more farmers want to sell corn. Other options are incorrect because Some might think that higher prices mean less supply; It's a common mistake to think that all costs go down with higher demand.
Key Concepts
Market Dynamics
Supply and Demand
Profit Maximization
Topic
Market Dynamics in Agriculture
Difficulty
easy level question
Cognitive Level
understand
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