Question

An infestation of banana spiders makes it extremely difficult to harvest Indian bananas. The U.S. Surgeon General has stated that there are numerous health benefits from eating bananas. As a result, one should expect:________.A) Equilibrium price to fall, but equilibrium quantity to be indeterminate from the information given.
B) Equilibrium price to rise, but equilibrium quantity to be indeterminate from the information given.
C) Equilibrium price to be indeterminate from the information given, but equilibrium quantity to rise.
D) Equilibrium price to be indeterminate from the information given, but equilibrium quantity to fall.

Answer 1

Answer:

B) Equilibrium price to rise, but equilibrium quantity to be indeterminate from the information given.

Explanation:

Since it is very difficult to harvest bananas, that means that the production costs of bananas has increased. When the production costs of any good or service increases, their supply curve shifts to the left. That leftward shift will decrease total quantity supplied and increase the price of the good or service at every quantity demanded level.

We know that the equilibrium price will increase, but we cannot know what will happen to the equilibrium quantity.