Question

The individual supply curve is positively sloped because a higher price

A. will discourage consumers from buying so more will be supplied.
B. will not last long so that the firm has to increase production while it can.
C. ensures that a firm will make more profit by purchasing more materials and hiring more workers.
D. encourages a firm to increase its output by purchasing more materials and hiring more workers.

Answer 1

The individual supply curve is positively sloped because a higher price encourages a firm to increase its output by purchasing more materials and hiring more workers.

Step-by-step explanation:

In thinking about the factors that affect supply, remember what motivates firms: profits, which are the difference between revenues and costs. If a firm faces lower costs of production, while the prices for the goods or services the firm produces remain unchanged, a firm's profits go up. When a firm's profits increase, it is more motivated to produce output, since the more it produces the more profit it will earn. When costs of production fall, a firm will tend to supply a larger quantity at any given price for its output. This can be shown by the supply curve shifting to the right.

Answer 2

A higher price encourages a firm to increase its output by purchasing more materials and hiring more workers, because it aims to maximize profits which is reflected in a positively sloped supply curve. So the correct option is D.

Step-by-step explanation:

The individual supply curve is positively sloped primarily because a higher price for goods and services motivates a firm to increase its output. This is due to the fact that, with higher prices, the firm stands to make more profit. Answering the question, the correct statement is D: A higher price encourages a firm to increase its output by purchasing more materials and hiring more workers.

Essentially, if a firm can sell its products at a higher price, the potential for increased profits exists. To capitalize on this opportunity, the firm may invest in more materials and labor to produce more goods. It believes that by doing so, it will be able to maximize its profits before prices potentially drop again. This assumption can be seen in the behavior of the supply curve; when costs of production fall or when firms can sell their output at higher prices, they supply a larger quantity, resulting in the curve shifting to the right.

By contrast, if the costs of production rise, the firm's potential profit decreases, usually resulting in the firm supplying a smaller quantity of the product, which can be observed as a leftward shift of the supply curve.