ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A rise in the cost of raw materials (but not machinery) raises the cost.
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The good becomes cheaper to produce.
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The good becomes more expensive to produce.
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It does not have any effect on the cost of the good.
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Detailed explanation-1: -Any change in the cost of an input such as the raw materials, machinery, or labor used to produce a good, will affect supply. As input costs increase, the firm’s marginal costs also increase, decreasing profitability and supply.
Detailed explanation-2: -Any change in the cost of an input used to produce a good-such as raw materials, machinery, or labor-will affect supply. A rise in the cost of an input will cause a fall in supply at all price levels because the good has become more expensive to produce.
Detailed explanation-3: -Changes in supply conditions, causing shifts in the supply curve. If it costs more to produce a product, suppliers will want a higher price for it.
Detailed explanation-4: -The law of supply says that a higher price will induce producers to supply a higher quantity to the market. Because businesses seek to increase revenue, when they expect to receive a higher price for something, they will produce more of it.