Forest fires have inflicted significant damage to a region, leaving several paper mills destroyed in their wake. As such, the supply of paper in the region has been significantly reduced. Without government intervention, which of the following is likely to occur?(1 point)

Question

Responses

A surplus of paper will persist unless government action is taken to decrease paper production in the region.
A surplus of paper will persist unless government action is taken to decrease paper production in the region.

A temporary surplus of paper will be remedied as consumers bid down prices, and paper production decreases due to the loss of profits associated with falling prices.
A temporary surplus of paper will be remedied as consumers bid down prices, and paper production decreases due to the loss of profits associated with falling prices.

A temporary shortage of paper will be remedied as consumers bid up prices, and paper production increases due to the rising profits associated with higher prices.
A temporary shortage of paper will be remedied as consumers bid up prices, and paper production increases due to the rising profits associated with higher prices.

A shortage of paper will persist indefinitely unless government action is taken to increase paper production in the region.
A shortage of paper will persist indefinitely unless government action is taken to increase paper production in the region.
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Answer 1

The most accurate response given the context of reduced supply due to the destruction of paper mills by forest fires is:

A temporary shortage of paper will be remedied as consumers bid up prices, and paper production increases due to the rising profits associated with higher prices.

This response reflects typical market behavior where a reduction in supply leads to a higher price, incentivizing remaining producers to increase production if it's profitable to do so, potentially attracting new entrants into the market in the longer term.