Question

What effect will each of the following have on the supply of auto tires? (Keeping all else constant) a. A technological advance in the methods of producing tires: . b. A decline in the number of firms in the tire industry: . c. An increase in the prices of rubber used in the production of tires: . d. The expectation that the equilibrium price of auto tires will be lower in the future than currently: . e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production. (with no change in the price of auto tires): . f. The levying of a per-unit tax on each auto tire sold: . g. The granting of a 50-cent-per-unit subsidy for each auto tire produced: .

Answer 1

Answer:

Supply would increase

Supply would decrease

Supply would decrease

Supply would increase

Supply would increase

Supply would decrease

Supply would increase

Explanation:

A decline in the number of firms in the tire industry reduces the supply of auto tires.

An increase in an input in the production of tires increases the cost of production of tires and this would discourage supply. Supply would fall.

Subsituite goods are goods that can be used in place of one another.

If the price of large tires decrease, suppliers would shift from producing large tires to auto tires. Supply of auto tires would increase.

A tax would increase the cost of production, so supply would fall as A result.

A subsidy encourages production of a good. Subsidy reduces the cost of production and as a result, supply would increase.

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