An article in the Wall Street Journal discussed research at Ohio State University that may lead to producing carbon black—an important input in automobile tire making—out of eggshells, tomato skins, and other food waste. According to the article, this research could lead to a reduction in the cost of producing tires.
a. Assuming that the research is successful, use a demand and supply graph to show the effect of these falling costs on consumer surplus in the market for tires.
b. Can we be certain whether these falling costs will increase producer surplus? Briefly explain.