📚 Learning Guide
Production Possibilities and Price Effects
medium

If the increase in the price of corn (A) leads to a decrease in the supply of soybeans (B), then an increase in the price of wheat (C) would likely result in what effect on the supply of corn (D)?

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Choose the Best Answer

A

Decrease

B

Increase

C

No Effect

D

Fluctuate

Understanding the Answer

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Answer

When the price of corn goes up, farmers might decide to grow more corn because they can earn more money. However, if the price of corn increases, it can also lead to farmers focusing less on other crops, like soybeans. This means that if the price of wheat also goes up, farmers might choose to grow wheat instead of corn or soybeans, which can affect the overall supply of corn. Therefore, if the price of wheat rises, it could further decrease the supply of corn because farmers are shifting their resources to grow wheat instead. For example, if a farmer usually grows corn and soybeans but sees higher profits in wheat, they might plant more wheat and less corn, reducing the supply of corn in the market.

Detailed Explanation

When wheat prices go up, farmers may choose to grow more corn instead of soybeans. Other options are incorrect because Some might think that higher wheat prices mean less corn; It might seem like wheat prices don't affect corn.

Key Concepts

Production Possibilities
Substitutes in Production
Market Dynamics
Topic

Production Possibilities and Price Effects

Difficulty

medium level question

Cognitive Level

understand

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