Suppose Antitheft Auto Alarms Are Produced in a Price-Taker Market

question 93

Multiple Choice

Suppose antitheft auto alarms are produced in a price-taker market that is initially in long-run equilibrium. It is estimated that only 23 percent of all autos have alarms. Due to rising auto theft, Congress mandates alarms in every vehicle. Assume complete compliance. If the industry is an increasing cost industry, price will

• A) increase in both the short run and long run.
• B) decrease in both the short run and long run.
• C) increase in the short run but not in the long run.
• D) decrease in the short run but not in the long run.

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Definitions:

Gases Exchange

The process of oxygen and carbon dioxide moving between the bloodstream and the lungs in animals, and the atmosphere and cells in plants.

Diffusion

The process by which molecules spread from areas of high concentration to areas of low concentration, often leading to equilibrium.

Osmosis

The process by which molecules of a solvent pass through a semipermeable membrane from a less concentrated solution into a more concentrated one.

Filtration

The process of separating solids from liquids or gases using a filter medium that allows only the fluid to pass through.