Assume that the market for good T is currently in equilibrium and good T is an inferior good. If consumer income rises at the same time that the costs of producing good T falls, then what will happen to the market equilibrium?
A. Price increases; Quantity indeterminate
B. Price indeterminate; Quantity decrease
C. Price indeterminate; Quantity increases
D. Price decreases; Quantity indeterminate
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Correct Answer: D, Price decreases; Quantity indeterminate. When the costs of production fall, supply shifts to the right (P falls, Q rises). Since T is an inferior good, demand shifts left when income increases (P falls, Q falls). After both shifts, the quantity can increase, decrease, or stay the same.