Reference no: EM132324061

Suppose that the production possibilities curves of electric cars and those with gasoline is arched towards the outside.

In response to strong consumer demand, producers decide to produce 20 million more electric cars and, on the other hand, they must reduce the production of gas-powered cars by 20 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 10 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 10 million units? Explain