Demand and Supply for Grapes

Multiple Choice

Demand and Supply for Grapes

The following tables show the demand and supply for grapes. Demand is uncertain, with D1 and D2 each occurring 50% of the time. Suppliers must base their decisions on the expected price and must sell all grapes they bring to the market at the going market price.


-If suppliers have rational expectations,what will be their expected price of grapes?

A) $2.00 per pound.
B) $2.50 per pound.
C) $3.00 per pound.
D) $3.50 per pound.