Question

A frozen food manufacturer can produce either pizzas or pepperoni rolls. As a result of a decrease in the price of pepperoni rolls, the firm produces fewer pepperoni rolls and more pizzas. An economist would explain this by saying:__________. a. the supply of pepperoni rolls increased and the supply of pizzas decreased. b. there has been an increase in the quantity supplied of pepperoni rolls and a decrease in the quantity supplied of pizzas. c. there has been an increase in the quantity supplied of pepperoni rolls and a decrease in the supply of pizza. d. there has been a decrease in the quantity supplied of pepperoni rolls and an increase in the supply of pizza.

Answer 1

Answer: An economist would explain this by saying there has been a decrease in the quantity supplied of pepperoni rolls and an increase in the supply of pizza. Option D

Explanation: The law of supply states that an increase in price leads to an increase in quantity supplied. We can therefore say that a decrease in price will lead to a decrease in quantity supplied.

Therefore, since there has been a decrease in the price of pepperoni rolls, the manufacturer will produce less and this will lead to a decrease in the quantity supplied of pepperoni rolls and an increase in the supply of pizza.