Good X is produced in a competitive market using input A. Explain what would hap
ID: 1104781 • Letter: G
Question
Good X is produced in a competitive market using input A. Explain what would happen to the supply of good X in each of the following situations:
a. The price of input A decreases.
It will decrease.
It will not change.
It will increase.
b. An excise tax of $3 is imposed on good X.
It will decrease.
It will increase.
It will not change.
c. An ad valorem tax of 7 percent is imposed on good X.
It will decrease.
It will not change.
It will increase.
d. A technological change reduces the cost of producing additional units of good X.
It will increase.
It will not change.
It will decrease.
Explanation / Answer
Answers
a)
option
it will decrease
the increase in price shifts supply curve to the left which decreases the supply.
b)
it will decrease
the excise tax decreases supply and shifts it to the left.
c)
it will decrease
the supply curve does not shift parallel by it but decreases supply at each price
d)
It will increase.
The reduction in cost shifts supply to the right
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