Suppose Two Events Occur Simultaneously in the Market for Automobiles

question 21

Multiple Choice

Suppose two events occur simultaneously in the market for automobiles: an improvement in assembly line technology and the economy enters a recession (which decreases consumers' income) .What is likely to happen to equilibrium price?  

• A) Price will rise. 
• B) Price will fall. 
• C) Price will remain the same. 
• D) Price will rise and then fall.

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Definitions:

Manufacturing Plant

A facility where raw materials are transformed into finished products through various processes and machinery, typically involving assembly lines and specialized equipment.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping due to the law of demand.

Cost Function

A mathematical relationship that describes how the costs incurred by a company vary with the level of output or production.

Cartel Arrangement

An agreement among competing firms in the same industry to control prices, limit output, or divide markets, in order to maximize profits collectively.