Economics · May / June 2023 · Paper 12 · Question 7

The diagram shows the supply curve for coffee. The price of coffee increases from P1 to P2. How would this benefit firms in the coffee industry?

1. AA higher price gives firms the ability to increase profits.
2. BA higher price gives firms the incentive to reduce total fixed costs.
3. CA higher price will encourage consumers to buy more coffee increasing total revenue.
4. DA higher price will encourage less firms to enter the market to supply coffee.

As printed in the paper