Two factors are affecting the domestic auto industry: (1) an increase in cheap Korean imports (2) an increase in the cost of materials. What can we say about equilibrium price and quantity of domestic autos?

Question

Quizplus · Accepted Answer

An increase in cheap Korean imports increases supply, potentially lowering prices, while an increase in material costs decreases supply, potentially raising prices. The net effect on price is indeterminate, but the equilibrium quantity will likely fall due to reduced supply from higher costs.

Two Factors Are Affecting the Domestic Auto Industry: (1) an Increase