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Factor market supply slopes up because: a) supply always slopes up b) they are expensive to produce c) sellers have an advantage d) the opportunity cost of provision rises

Economics Dec 09, 2020

Factor market supply slopes up because:

a) supply always slopes up

b) they are expensive to produce

c) sellers have an advantage

d) the opportunity cost of provision rises

Expert Solution

The answer is d).

A upward sloping supply curve indicates that the price increases with the quantity supplied, all else the same. As an agent supplies more and more of the factor of production, each additional unit will carry a higher opportunity cost, because the amount of output that could have been produced if the factor were used in alternative use is higher. Therefore, to induce the agent to supply the additional unit of factor, firms must offer a higher price. Thus, the supply curve is upward sloping.

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