Final answer:
The increase in the price of rubber might decrease the supply of tires, while an advance in technology would increase supply. Considering only the technology factor, the supply of tires increases, making option c the correct answer.
Thus the corret opction is:b
Step-by-step explanation:
When considering increases in the price of rubber (a key input in the production of tires) and an advance in tire production technology, two opposing effects on the market for tires can be observed.
The increase in the price of rubber may lead to a decrease in supply, as the cost of production for tires increases.
In contrast, advances in tire production technology typically lead to an increase in supply, as it becomes cheaper to produce tires, and more can be produced at every price level.
This type of technology improvement can be depicted as a rightward (or downward) shift in the supply curve.
The demand for tires, in this case, might not necessarily change due to these two specific factors unless they indirectly affect consumers’ demand.
Therefore, the correct answer, considering the given information about the advance in technology, which increases supply, is c. is unaffected, and the supply of tires increases.
The complete question is:content loaded
Suppose an increase in the price of rubber coincides withtires decreases an advance in the technology of tire production. As a result of these two events, the demand for tires
a. decreases, and the supply of tires increases.
b. is unaffected, and the supply of tiresdecreases.
c. is unaffected, and the supply of tires increases.
d. None of the above is necessarily correct