The diagram shows the market for hazelnuts. The most likely effect of a warm summer on the output of hazelnuts is for:

Question

BlackTom AI · Accepted Answer

To begin, let's think about what a warm summer does to hazelnut supply. A warm summer tends to boost hazelnut yields and production, shifting the supply curve to the right (more is supplied at each price). This rightward shift creates a new equilibrium with a higher quantity of hazelnuts and a lower market price.

Option A: The price to remain at Pe and producer surplus to increase. This contradicts the typical outcome of a rightward supply shift, which lowers price. If the price stayed the same, the shift wouldn’t be reflected in market outcomes, and producer surplus would not automatically rise just from more output at the same price. This option is inconsistent with the supply increase.

Option B: The price to increase and consumer surplus to decrease. A price increase would occur if supply shifted left (less supply), not with a warm summer that increases supply. With the supply shift to the right, the price falls, not rises. Therefore this option misreads the direction of the price change and the effect on CS.

Option C: Both price and consumer surplus to decrease. A fall in price is expected with higher supply, which would typically increase consumer surplus, not decrease it. So this option incorrectly states the price move and the CS outcome.

Option D: Both price and producer surplus to increase. While quantity rises, the price is expected to fall due to greater supply. An increased price is unlikely; hence, producer surplus does not necessarily rise in this scenario. This option misstates the price direction.

Option E: The price to decrease and consumer surplus to increase. This matches the standard effect of a positive supply shock: more hazelnuts produced at every price leads to a lower equilibrium price and higher quantity. The lower price boosts consumer surplus, while the quantity increase reflects greater availability for consumers, aligning with the typical welfare change in a competitive market.

Assessment 2 - Part A - May 2025

The diagram shows the market for hazelnuts. The most likely effect of a warm summer on the output of hazelnuts is for:

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Assessment 2 - Part A - May 2025

The diagram shows the market for hazelnuts. The most likely effect of a warm summer on the output of hazelnuts is for:

View Explanation

Log in for full answers

Similar Questions

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