Today's cars rely heavily on computers chips for many things: internal GPS, the parking assistance function, measuring tire pressure, etc.As a result, chips are a crucial part of the supply chain for building cars.Auto manufacturers are famous for using a Japanese style of production called just-in-time production.This means that they keep very little inventory of any parts in the auto factories, and they only make purchases from their suppliers once they have orders received from customers for cars.

COVID-19 has disrupted the chip market significantly.There is now more demand for chips generally (people are buying more computers to work from home, and other electronics to keep themselves occupied) on top of which factories which produce chips have faced disruptions (outbreaks of COVID among the staff, reduced output due to implementing social distancing measures among staff in the factory).

1) Which diagram correctly shows the changes in the chip market due to COVID disruptions?

a. Diagram A

b. Diagram B

c. Diagram C

Diagram A Diagram B Diagram C P P P supply supply supply demand demand demand Q Q QQuantity Price per demanded Consumer barrel (WTP) (barrels) Description Cost A $5.25 195,000 Cost per barrel transported $3.20 B $5.50 180,000 Annual pipeline operating expenses $1,095,000 C $6.00 100,000 Cost of building the pipeline $1,500,000,000 D $4.25 132,000 E $4.00 120,000 F $4.75 157,000 G $4.50 149500 H $5.00 199,500 $5.75 120,000