What effect will each of the following have on supply of auto tires What effect

Question

What effect will each of the following have on supply of auto tires

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: (Click to select) b. A decline in the number of firms in the tire industry: (Click to select) C. An increase in the prices of rubber used in the production of tires: | (Click to select) d The expectation that the equilibrium price of auto tires will be lower in the future than currently: (Click to select) e. A decline in the price of large tires used for semi trucks and earth-hauling rigs, a substitute in production (with no ch f. The levying of a per-unit tax on each auto tire sold: (Click to select) g. The granting of a 50-cent-per-unit subsidy for (Click to select) The granting of a 50-cent-per-unit subsidy for each auto tire produced: (Click to select) (Click to select) No change Increase Decrease References

Explanation / Answer

a.

Supply will rise because the technological advance gives the new method to tire manufacturers to produce more tires using the same amount of inputs.

b.

Supply will decrease because there are fewer firms in the industry.

c.

Supply will decrease because price increase of rubber will increase in production costs.

d.

Supply would increase since equilibrium price of auto tires will be lower in the future causes firms to sell their inventories today while the price is still high.

e.

Supply will increase because the decline in the price of large tires used for semi trucks and earth-hauling rigs will cause firms to decrease manufacture of large and produce more auto tires.

f.

Supply will reduce since per-unit tax on each auto tire sold increases the cost of making since the tire manufacturers must now pay for input costs and the per unit tax.

g.

Supply will rise because the 50-cent-per-unit subsidy decreases the cost of making. The tire manufacturers get the subsidy, which they can deduct from their input costs.

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