Assume an auto firm’s factories are capable of producing both large an

Assume an auto firm’s factories are capable of producing both large and small cars and are operating at full capacity. Assume the price of large cars increases due to a shift in consumers’ preferences toward large cars and away from smaller cars.

What would reasonably be expected to happen to the equilibrium price and quantity of the firm’s small cars? A) Equilibrium price would increase and equilibrium quantity would decrease.
B) Equilibrium price and quantity would both decrease.
C) Equilibrium price would decrease and equilibrium quantity would increase.
D) Equilibrium price and quantity would both increase.

ANSWER

B