Question

In Vintland, wild-caught oysters are being replaced with farmed oysters, which have fewer negative effects and many more significant benefits. However, the production efficiency of farmed oysters has driven down the price of oysters so significantly that wild-caught oysters can no longer compete. After six months, everybody has switched to the cheaper and better farmed oysters. Please select the choice below that best describes the short-run effects of this industrial change on Vintland's GDP and its standard of living. Assume that Vintland consumes the same quantity of oysters now as they did six months ago.
A. GDP increases and standard of living decreases
B. GDP decreases and standard of living increases
C. GDP and standard of living both decrease
D. GDP and standard of living both increase
E. There is not enough information to answer the question

Answer 1

Option B. GDP decreases and standard of living increases.

GDP decreases because the price (amount paid) of the oysters decreases this causes a deflation in Income.

The standard of living increases because of the increased positive benefits received from oyster farming.