Suppose, ceteris paribus, that the State of Florida imposes a tax on all agricul
ID: 1218678 • Letter: S
Question
Suppose, ceteris paribus, that the State of Florida imposes a tax on all agricultural products while at the same type a severe drought hits the major apple-growing regions of the U.S. Which of the following statements is correct? a. The price of Florida oranges will increase and the quantity will increase. b. The price of Florida oranges may decrease and the quantity may decrease. c. The price of Florida oranges may increase and the quantity may not change. d. The price of Florida oranges will not change but the quantity may decrease. e. the price of Florida oranges will increase and the quantity may decrease.
Explanation / Answer
The answer of this question is
a. The price of Florida oranges will increase and the quantity will increase.
This is because as we know that State of Florida imposes a tax on all agricultural products and due to drought in apple production price increases.
And as orange is a substitute to apple, consumers choose to consume more orange which inturn impact quantity of orange production.
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