Question

Assume the market for oranges is perfectly competitive. If the demand for oranges​ increases, will the market supply additional​oranges? If the demand for oranges​ increases, then the marketA. will not supply additional oranges because oranges produced by different sellers are differentiated.B. will supply additional oranges because producers seek the highest return on their investments.C. will supply additional oranges because government bureaucrats will order additional orange production.D. will not supply additional oranges because consumers are not willing to pay higher prices for fruit.E. will not supply additional oranges because producers are price takers.

Answer 1

Answer:

The correct answer is option B.

Explanation:

The market for oranges is perfectly competitive. An increase in the demand for oranges will cause the demand curve to move to the right. This rightward shift in the demand curve will cause the equilibrium price and quantity to increase.

At higher price, the producers will supply more oranges, because they will earn more profits. The supply of product is positively related to its price. So at higher price of oranges, more quantity will be supplied.