Consider the market for nuclear batteries. A nuclear battery uses atomic energy to produce an extremely...

Consider the market for nuclear batteries. A nuclear battery uses atomic energy to produce an extremely long-lasting power source. An input in the production of nuclear batteries is promethium, a rare earth metal. China, the world’s largest producer of promethium, recently announced that it would close three of its eight rare earth metal mines, resulting in an increase in the price of promethium. In the market for nuclear batteries, the market price _____, and market quantity _____.

A. increases...increases

B. increases...decreases

C. decreases...increases

D. decreases...decreases

Solutions

Expert Solution

Ans.- (B)

If price of Promethium increases, then cost of producing nuclear battery increases because Promethium is an input for nuclear battery. Supply will fall due to higher cost of production and therefore supply curve for nuclear battery shift to the left leading to higher price and lower quantity.

In the market for nuclear batteries, the market price increases, and market quantity decreases.

Rahul Sunny answered 1 year ago

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