Question

In this market for sunscreen, there is a decrease in the price of zinc oxide, an input into sunscreen, and more producers enter the market. The equilibrium price: a) increases and the equilibrium quantity decreases. b) decreases and the equilibrium quantity increases. c) is ambiguous and the equilibrium quantity increases. d) decreases and the equilibrium quantity is

Answer 1

Answer:

 b) decreases and the equilibrium quantity increases.

Explanation:

If there is a decrease in the price of zinc oxide, an input into sunscreen, the cost of production decreases and supply increases. This shifts the supply curve to the right.

If more producers enter the market, supply would increase and the supply curve would shift to the right.

The rightward shift of the supply curve would reduce equilibrium price and equilibrium quantity would increase.

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