Question

Land in the United States can be used to produce either soybeans or corn. The price of soybean fertilizer has fallen due to cheaper imports from China.
What will change for soybeans and corn?
Choose 1 answer:

(Choice A)
A
Supply of both corn and soybeans will increase

(Choice B)
B
Supply of soybeans will decrease and supply of corn will increase

(Choice C)
C
Supply of soybeans will increase and the supply of corn will decrease

(Choice D)
D
Quantity supplied of corn and quantity supplied of soybeans will both increase

(Choice E)
E
Quantity supplied of corn and quantity supplied of soybeans will both decrease

Answer 1

Answer: C . Supply of soybeans will increase and the supply of corn will decrease

Explanation:

Soybean fertilizer is an integral input in the farming of soybean so with the price of soybean fertilizer decreasing, it will be cheaper to grow soybean as opposed to corn.

Farmers will therefore farm more soybeans than corn to benefit from this lower cost and so will farm less of corn as they can only farm one at a time. This will lead to an increased supply of soybean and a reduced supply of corn.