One reason Taco Bell raised its prices was the result of an increase in:

• A. the cost of ingredients used to make its food
• B. government subsidies for fast-food restaurants
• C. consumer demand for healthier options
• D. the number of competitors in the fast-food market

Answer: (A)

Verified step by step guidance

1. Identify the economic concept involved: When a firm raises its prices, it is often due to changes in either costs or demand. Here, we need to understand which factor would cause Taco Bell to increase prices.
2. Analyze the options given: An increase in the cost of ingredients means Taco Bell's production costs rise, which typically leads to higher prices to maintain profitability.
3. Consider the effect of government subsidies: If subsidies increased, costs would likely decrease, potentially lowering prices, so this option does not explain a price increase.
4. Evaluate consumer demand changes: An increase in demand for healthier options might shift consumer preferences but does not directly cause Taco Bell to raise prices unless it affects their costs or demand for their products.
5. Assess competition: An increase in the number of competitors usually puts downward pressure on prices, not upward, so this is unlikely to cause a price increase.