E202Solutions2.1

E202Solutions2.1 - : The supply curve would shift left....

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Problem Set Two Solutions Chapter 3 2. How would each of the following affect the U.S. market supply for corn? Does the supply curve shift left or right and why? a. A new and improved crop rotation technique is discovered. Answer : The supply curve would shift right. The discovery is a technological improvement. The improved technique would enable more crops to be produced with the same inputs. b. The price of fertilizer falls. Answer : The supply curve would shift right. Fertilizer is an input. Lower input prices shift the supply curve to the right. c. The government offers new tax breaks to farmers. Answer : The supply curve would shift right. The new tax breaks make farming relatively more profitable than before. Thus those who were employed in a job that was just a little better than being a farmer would switch to farming. d. A tornado sweeps through Iowa. Answer
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Unformatted text preview: : The supply curve would shift left. Tornadoes destroy corn. 4. An Arizona student claims to have spotted a UFO over the desert outside of Tucson. How will his claim affect the supply (not the quantity supplied) of binoculars in Tucson stores? Answer : The demand for binoculars might increase, leading to an increase in the quantity of binoculars supplied, but no change in the supply of binoculars should occur. The UFO sighting does nothing to change the factors that govern the supply of binoculars. 5. What will happen to the equilibrium price and quantity of oranges if the wage paid to orange pickers rises? Answer : An increase in the cost of an input used in orange production will shift the supply curve of oranges to the left, resulting in an increase in the equilibrium price and a decline in the equilibrium quantity of oranges....
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