Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 3 - Demand, Supply, and Market Equilibrium - Questions - Page 66: 6e

Answer

A decline in the price of the large tires will result in an increase of supply of normal tires.

Work Step by Step

When price decreases, supply increases. If the same firms can produce both types, a lower price for large tires makes them less profitable, so firms reallocate capacity toward the relatively more profitable auto tires, raising auto-tire supply.. A decline in the price of the large tires will result in an increase of supply of normal tires.
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