Over the last three years, Christmas tree prices have increased from an average of $35 per tree to over $75 per tree. How would a Christmas tree farm and the overall industry respond to the price change under the following circumstances? Be sure to explain how your answer depends on the elasticity of supply. The price increase is a result of fewer Christmas tree farms harvesting trees in response to consumers purchasing more artificial trees. The effect of the price
Over the last three years, Christmas tree prices have increased from an average of $35 per tree to over $75 per tree. How would a Christmas tree farm and the overall industry respond to the price change under the following circumstances? Be sure to explain how your answer depends on the elasticity of supply.
The effect of the price increase on the Christmas tree industry will be as follows:
*In the long run, the industry supply curve shifts to the left.
*In the long run, as tree farms sell fewer trees, they make losses and exit the industry.
*In the short run, the increase in price leads to profits for tree farms.
*In the short run, the tree farms exit the Christmas tree business and grow other lucrative plants.
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