Question

Q) The supply curve slopes upward when graphed against _____, because of ______. a) the price...

Q) The supply curve slopes upward when graphed against _____, because of ______.

a) the price of the good; increasing marginal cost

b) the price of the good; decreasing marginal cost

c) income; increasing marginal cost

d) income; decreasing marginal cost

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Answer #1

Answer: a) the price of the good; increasing marginal cost

supply curve slopes upwards and this shows the increase in the supply of the product. So, when the price of the product increases, demand will decrease but the supply will increase. The increase in marginal cost shows that the production of one additional product increases the marginal cost of the product and marginal cost of the product is constantly growing. In this case, the price should also simultaneously increase. When the marginal cost is equal or higher than the price of the product, the firms shut down their production to stop the loss.

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