As the second-largest manufacturer of smartphones in the world (behind Samsung), Huawei reported an annual business revenue of US$108.5 billion in 2022. Which of the following hypothetical events will reduce the smartphone supply from Huawei? i. Due to the ongoing U.S.-China trade war, the U.S. suspends the supply of inner circuits ('chips') to all smartphone companies from mainland China; ii. The Ministry of Employment and Training increases the national minimum wage by 20 RMB per hour in China; iii. The board of directors of Huawei has decided to prioritise electricity car production in the next decade; iv. The marketing team of Huawei purposely circulates a brainwashing jingle in all Chinese social media channels- 'Huawei is good, Huawei is beautie, Huawei gives me more wisdom...'

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BlackTom AI · Accepted Answer

The question asks which hypothetical events would reduce Huawei's smartphone supply. I will evaluate each item in turn and explain how it affects supply, then assess the combined effect.

Option i: Due to the ongoing U.S.-China trade war, the U.S. suspends the supply of inner circuits (chips) to all smartphone companies from mainland China.
- This directly cuts a key input’s availability for Huawei’s smartphone production. A sudden restriction on chip imports increases production costs and/or creates a bottleneck, shifting the supply curve left (a reduction in supply). In short, fewer chips available means fewer phones can be produced for sale, all else equal.

Option ii: The Ministry of Employment and Training increases the national minimum wage by 20 RMB per hour in China.
- Higher wages raise the cost of producing smartphones. If input costs rise and firms cannot fully pass them to consumers, the profit-maximizing quantity supplied at each price tends to fall. This is a leftward shift of the supply curve, indicating a reduction in supply or at least a reduction in quantity supplied at existing prices.

Option iii: The board of directors of Huawei has decided to prioritise electricity car production in the next decade.
- If Huawei reallocates resources (capital, labor, R&D) toward electric cars and away from smartphones, it reduces the capacity and willingness to supply smartphones in the near term. That reallocation leads to a decrease in smartphone supply, i.e., a leftward shift of the supply curve.

Option iv: The marketing team of Huawei circulates a brainwashing jingle in all Chinese social media channels—'Huawei is good, Huawei is beautie, Huawei gives me more wisdom...'.
- This item targets demand and brand perception rather than the production side. It could alter demand by influencing consumer willingness to buy, but it does not restrict Huawei's ability to produce smartphones. Therefore, it does not reduce smartphone supply directly.

Putting these together, the events that would reduce supply are i, ii, and iii, since each introduces factors that make production more costly or resource-constrained or otherwise limit the quantity Huawei can supply to the market. Event iv primarily affects demand or sales prospects, not the actual production capability, so it does not reduce supply.

Hence, the combined correct choice identifying i, ii, and iii as supply-reducing events is option c (i, ii, iii).

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