Supply chain shortages have limited the number of microchips available to car manufacturers in the US. Since every new car needs microchips to control it, we can think of a limit on the number of microchips as a quota on the production of new cars. If this quota is binding, which of the following may be a market consequence of a production quota on new cars in the US market? Do not worry about the underlying facts; only whether the explanations make economic sense given our model. (Select one or more) (a) The quantity supplied of new cars
Supply chain shortages have limited the number of microchips available to car manufacturers
in the US. Since every new car needs microchips to control it, we can think of a limit on the
number of microchips as a quota on the production of new cars. If this quota is binding,
which of the following may be a market consequence of a production quota on new cars in the
US market? Do not worry about the underlying facts; only whether the explanations make
economic sense given our model. (Select one or more)
(a) The quantity supplied of new cars will rise to meet the quota.
(b) The quantity supplied of new cars will fall to meet the quota.
(c) The quantity supplied is unaffected by a binding quota.
(d) The
(e) The price of new cars will fall until there is no excess demand.
(f)
(g) Consumer surplus will decrease as a result of the quota.
(h) Consumer surplus will be unaffected by the quota.
(i) There will be deadweight loss in the market relative to a competitive equilibrium.
(j) The quota constitute a Pareto improvement relative to the competitive equilibrium.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
