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 not change. It will increase. It will decrease. b. An excise tax of $3 is imposed on good X. It will increase. It will not change. It will decrease. c. An ad valorem tax of 7 percent is imposed on good X. It will increase. It will decrease. It will not change. d. A technological change reduces the cost of producing additional units of good X. It will increase. It will not change. It will decrease.

Answer 1

Answer:

a. It will increase.

b. It will decrease

c. It will decrease

d. it will increase.

Explanation:

If the price of an input needed for production of good X decreases, the cost of production of good X reduces. It becomes cheaper to produce good X and and as a result the supply of good X would increase.

An increase in tax increases the cost of production and makes production of good X more expensive. As a result, the supply of good X would fall.

technological change that reduces the cost of producing additional units of good X, would make the production of good X less expensive. As a result, the supply of good X would increase