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A supply curve _____
A supply curve _____.
a. tells us the minimum that someone is willing to pay for an additional unit of a good or service
b. shows us that the highest price that someone is willing to pay for an additional unit of a good or service falls as the quantity decreases
c. tells us the lowest price at which someone is willing to sell
d. tells us that marginal cost decreases as the quantity purchased increases
Expert Solution
- A supply curve c. tells us the lowest price at which someone is willing to sell.
A producer's willingness to sell depends on the costs of production. The first few units of production tend to be cheap as you "pick the low-hanging fruit," but subsequent production gets more expensive as you have to bring lower-quality resources into use (like the poor soil in the example above). The supply curve for a given producer tells you the relationship between the number of total units produced and the minimum willingness to accept for the marginal unit of production. In other words, if a producer has already produced 500 bushels of wheat, what would be the lowest price he would accept for the 501st bushel.
The answer to this question is not A. or B. because these statements have to do with demand, not supply. The answer is not D because, as we saw with the example of the wheat farmer, marginal costs rise, not fall, as production increases.
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