Question

review question 03-04
what effect will each of the following have on the supply of auto tires?
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 price 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 it is now: (click to select)
e. a decline in the price of large tires used for semi trucks and earth - hauling rigs (with no change
in the price of auto tires): (click to select)
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 each auto tire produced: (click to select)

Explanation:

a. Technological advances lower production costs, allowing firms to produce more tires at each price, increasing supply.
b. Fewer firms mean fewer producers supplying tires, reducing overall supply.
c. Rubber is an input; higher input costs raise production expenses, reducing the quantity firms can supply at each price.
d. If firms expect lower future prices, they will supply more now to avoid selling at a lower price later, increasing current supply.
e. Large truck tires are a substitute in production. When their price falls, firms shift production to auto tires (more profitable now), increasing auto tire supply.
f. A per-unit tax raises production costs, reducing the quantity firms are willing to supply at each price.
g. A subsidy lowers production costs, encouraging firms to produce more tires at each price, increasing supply.

Answer:

a. Increase the supply of auto tires
b. Decrease the supply of auto tires
c. Decrease the supply of auto tires
d. Increase the supply of auto tires
e. Increase the supply of auto tires
f. Decrease the supply of auto tires
g. Increase the supply of auto tires