Corn is produced in a perfectly competitive market. The demand for ethanol decreases. This will cause the individual corn farmerʹs marginal revenue to ________ and their profit-maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

The demand for ethanol decreasing means less corn is needed for ethanol production, leading to a decrease in the demand for corn. This decrease in demand lowers the price farmers can charge for corn, which decreases their marginal revenue. With lower marginal revenue, the profit-maximizing level of output also decreases, as it's no longer profitable to produce as much corn.

Corn Is Produced in a Perfectly Competitive Market