Sia
Question
Statistics
Posted 5 months ago
Land in the United States can be used to produce either soybeans or corn. The price of soybean fertilizer has fallen due to cheaper imports from China.
What will change for soybeans and corn?
Choose 1 answer:
A) Supply of both corn and soybeans will increase
(B) Supply of soybeans will decrease and supply of corn will increase
(C) Supply of soybeans will increase and the supply of corn will decrease
D Quantity supplied of corn and quantity supplied of soybeans will both increase
(E) Quantity supplied of corn and quantity supplied of soybeans will both decrease
Sign in to unlock the answer
Answer from Sia
Posted 5 months ago
Solution by Steps
step 1
Consider the effect of the price of soybean fertilizer on the supply of soybeans. A decrease in the price of fertilizer would reduce the cost of production for soybeans
step 2
According to the law of supply, a decrease in production costs, holding all else constant, will lead to an increase in the supply of a good. Therefore, the supply of soybeans will increase
step 3
Now consider the effect on corn. Since land can be used for either soybeans or corn, cheaper soybean fertilizer may cause farmers to allocate more land to soybeans, reducing the land available for corn
step 4
With less land available for corn, the supply of corn would decrease, assuming the cost of corn production has not changed
step 5
The question asks for the change in supply, not the quantity supplied, so we focus on factors that shift the supply curve, not movements along the supply curve
Answer
The correct answer is that the supply of soybeans will increase and the supply of corn will decrease.
Provide the most correct one answer choice letter strictly in the following format enclosed by *
*C*
∻Key Concept∻ Supply and its determinants
Explanation
A change in the cost of production, such as a change in the price of inputs like fertilizer, is a determinant of supply that can shift the supply curve for a product. When the cost of production decreases, the supply of that product typically increases. Additionally, if two goods compete for the same resources (like land), an increase in the supply of one can lead to a decrease in the supply of the other.
Not the question you are looking for? Ask here!
Enter question by text
Enter question by image
Upgrade to Asksia Pro
Join a AskSia's Pro Plan, and get 24/7 AI tutoring for your reviews, assignments, quizzes and exam preps.
Unlimited chat query usages
Strong algorithms that better know you
Early access to new release features
Study Other Question