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.

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

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