Question

5. Which of the following provides the best example of the law of supply?

a.) falling labor costs cause an increase in supply

b.) some producers leave the industry, and the supply curve shifts to the right

c.) producers are willing to supply a greater quantity of a good at a higher price.

d.) improved technology shifts the supply curve to the left

"option (c) is NOT correct"

Answer 1

Soln. Option D is not correct as improved technology leads to cost efficient production and hence increase in supply, which shifts the supply curve to the right. Option B is incorrect as leaving of one producer does not impact the production capacity of other producer and hence, may not lead to supply. Option C is also not correct as greater quantity of good supply and raising the price has no direct relation.

When labor costs fall, it will help the company to hire more labor at same cost, that will lead to productivity and hence supply.Therefore, correct option is A.