If Brazil's gross revenue from coffee exports doubles from one ...

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If Brazil's gross revenue from coffee exports doubles from one year to the next even though the number of bags of coffee exported declines 50 percent,
 
  A) individual Brazilian coffee producers are price searchers.
  B) individual Brazilian coffee producers have substantial market power.
  C) the demand for Brazilian coffee is most likely elastic.
  D) the demand for Brazilian coffee is most likely inelastic.

Question 2

What is likely to happen to the allocation of resources if there is a sudden increase in the demand for a good produced by a perfectly competitive industry?
 
  What will be an ideal response?

[hramirez205]

Answer to Question 1

D

Answer to Question 2

If there is an increase in the demand for a good produced by a perfectly competitive industry, the equilibrium price in the industry will increase and the existing firms will earn higher profits. This will act as an incentive for newer firms to enter the industry. As such, resources and firms will move into the industry because of the sudden increase in the demand for this good.