question 8\nassume sugar is produced in a perfectly competitive industry that is in long - run equilibrium…

question 8\nassume sugar is produced in a perfectly competitive industry that is in long - run equilibrium. how will a decrease in the price of a sugar substitute affect the price of sugar and the profit of sugar producers in the short - run?\na) price of sugar: increase\nprofit of sugar producers: increase\nb) price of sugar: increase\nprofit of sugar producers: decrease\nc) price of sugar: decrease\nprofit of sugar producers: increase\nd) price of sugar: decrease\nprofit of sugar producers: decrease\ne) price of sugar: no change\nprofit of sugar producers: increase

question 8\nassume sugar is produced in a perfectly competitive industry that is in long - run equilibrium. how will a decrease in the price of a sugar substitute affect the price of sugar and the profit of sugar producers in the short - run?\na) price of sugar: increase\nprofit of sugar producers: increase\nb) price of sugar: increase\nprofit of sugar producers: decrease\nc) price of sugar: decrease\nprofit of sugar producers: increase\nd) price of sugar: decrease\nprofit of sugar producers: decrease\ne) price of sugar: no change\nprofit of sugar producers: increase

Answer

Brief Explanations:

When the price of a sugar - substitute decreases, consumers will shift their consumption towards the substitute. This reduces the demand for sugar. In a perfectly competitive market in the short - run, a decrease in demand leads to a decrease in the price of sugar. Since the price of sugar decreases and the cost structure of sugar producers remains the same in the short - run, the profit of sugar producers will decrease as profit = (Price - Average Total Cost) * Quantity and price has gone down.

Answer:

D. Price of Sugar: Decrease, Profit of Sugar Producers: Decrease