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You can buy any amount of rice at $15 per kg in the local market

Economics

You can buy any amount of rice at $15 per kg in the local market. The supply curve for rice is:

a. downward sloping

b. horizontal

c. data insufficient

d. upward sloping

e. vertical

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The correct answer is b. horizontal.

A horizontal supply curve is perfectly elastic. This is one of the characteristics of perfectly competitive markets. A horizontal supply curve means that the equilibrium quantity can be increased without increasing the equilibrium price of the product. This phenomenon occurs due to different situations such as low barriers to entry in the market, short production periods, or high stock availability.

Option a. is wrong because an increase in quantity would cause the price to decrease. Option d. is wrong because an increase in quantity would cause the price to increase. Option e. is also wrong since that is the example of a perfectly inelastic supply (fixed amount supplied in the market).