Reference no: EM132316815

Suppose that the curve of the possibilities of production of electric cars and gasoline cars is shifted outward.

In response to strong consumer demand, producers decide to produce 40 million more electric cars and, on the other hand, they must reduce the production of gaoline cars by 40 million units.

In order to reduce greenhouse gases, the government is announcing a new tax credit for the purchase of electric cars. To meet demand, producers are increasing their production of 20 million electric cars. All things being equal, can we expect the production of gasoline cars to drop, increase or remain stable, with an amount greater than, equal to or less than 20 million units? Explain.