Question

James Food inc. is one of many firms that sells apples. If the price of an apple is too low:

A. James Food Inc. would increase profit by increasing output

B. the quantity supplied of apples by James food inc. could be zero

C. the supply curve for apples will shift to the left

D. James food inc. can and should raise the price of the product.

Answer 1

If the price of an apple is too low,

Option A is incorrect because low price would induce producers to reduce profit because it have reduced overall profit.

Option B is correct because reduction in quantity supplied will cause movement along the supply curve and quantity supplied could fall to zero if the price is too low such that it is not able to cover variable cost.

Option C is incorrect as fall in price will not shift supply curve but cause movement along the supply curve.

Option D is incorrect because raising the price of its product will reduce its market share.