Question

What effect will each of the following have on the supply of auto tires? (Keeping all else constant)

Answer 1

Answer:

Explanation:

a. Total supply of auto tires will increase because firms will produce more. In the Demand and Supply graph the supply curve will shift to the right.

b. Total supply will decrease because there are less tires offered on the market. In the Demand and Supply graph the supply curve will shift to the left.

c. Total supply will decrease because cost of production will increase, then firms will offer less quantity of tires. In the Demand and Supply graph the supply curve will shift to the left.

d. Total supply will decrease because firms will perceive less benefits of selling auto tires in the future. In the Demand and Supply graph the supply curve will shift to the left.

e. The total supply could increase if large tires producers decide to produce auto tires because it is more attractive. In the Demand and Supply graph the supply curve will shift to the right.

f. Total supply will decrease because the tax creates incentives to produce less. In the Demand and Supply graph the supply curve will shift to the left.

g. Total supply will increase because the subsidy creates incentives to produce more. In the Demand and Supply graph the supply curve will shift to the right.