5. Consider the following perfectly competitive market for a good: Qs = 30 + 6P QD = 150-6P Now suppose that supply increases by 36 at each price (for example, now at P = 0, Qs = 66). After the increase in supply - which of the following is correct? a) The equilibrium price decreases by $3, and the quantity traded increases by 18 b) The equilibrium price decreases by $8, and the quantity traded decreases by 18 c) The equilibrium price decreases by $3, and the quantity traded decreases to 108
5. Consider the following perfectly competitive market for a good: Qs = 30 + 6P QD = 150-6P Now suppose that supply increases by 36 at each price (for example, now at P = 0, Qs = 66). After the increase in supply - which of the following is correct? a) The equilibrium price decreases by $3, and the quantity traded increases by 18 b) The equilibrium price decreases by $8, and the quantity traded decreases by 18 c) The equilibrium price decreases by $3, and the quantity traded decreases to 108
Chapter4: Markets In Action
Section: Chapter Questions
Problem 6SQ
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Question
Transcribed Image Text:6. In Carfree Town the citizens can travel by bicycle or skateboard. Aluminium is an input to
bicycles and wood is an input to skateboards. Assume that the markets for bicycles and
skateboards are both perfectly competitive.
A decrease in the price of wood used to make skateboards would:
a) Increase the equilibrium price of bicycles, and increase the equilibrium quantity traded of
skateboards
b) Decrease the equilibrium price of bicycles, and decrease the equilibrium quantity traded of
skateboards
c) Increase the equilibrium quantity traded of bicycles, and decrease the equilibrium price of
skateboards
d) Increase the equilibrium price of bicycles, and increase the equilibrium price of skateboards
e) Decrease the equilibrium quantity traded of bicycles, and increase the equilibrium quantity
traded of skateboards
Transcribed Image Text:5. Consider the following perfectly competitive market for a good:
Qs = 30 + 6P
QD = 150-6P
Now suppose that supply increases by 36 at each price (for example, now at P = 0, Qs = 66).
After the increase in supply - which of the following is correct?
a) The equilibrium price decreases by $3, and the quantity traded increases by 18
b) The equilibrium price decreases by $8, and the quantity traded decreases by 18
c) The equilibrium price decreases by $3, and the quantity traded decreases to 108
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