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Supply curves are positively-sloped because of: a
Supply curves are positively-sloped because of:
a. economies of scale.
b. self-interested suppliers seeking economic profit.
c. the increasing opportunity cost of resources.
d. the law of increasing returns.
e. the inefficient allocation of resources.
Expert Solution
The correct option is (c),
Supply curves are positively-sloped because of the increasing opportunity cost.
At higher levels of output, marginal cost increases at an increasing rate due to the law of diminishing returns. This increases the opportunity cost of producing a higher level of output. Hence, a producer requires a higher market price to supply more output, which makes the supply curve positively sloped.
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