Increasing marginal cost of production explains:
the law of demand.
the income effect.
why the supply curve is upsloping.
why the demand curve is downsloping.
The correct answer and explanation is :
The correct answer is: why the supply curve is upsloping.
Explanation:
The marginal cost (MC) of production refers to the additional cost incurred by producing one more unit of a good or service. As production increases, firms often face increasing marginal costs. This is because resources become scarcer or less efficient as more units are produced, leading to higher costs for additional units. This increase in marginal cost helps explain why the supply curve is upsloping.
In economics, the supply curve typically shows the relationship between the price of a good or service and the quantity that producers are willing to supply at each price. As the price of the good increases, producers are willing to supply more of it. This is because higher prices help cover the higher marginal costs associated with increased production. In other words, when the marginal cost of producing additional units increases, the price needs to rise in order for producers to be willing to supply those additional units. This results in the upward-sloping supply curve, where the price and quantity supplied have a positive relationship.
The upsloping nature of the supply curve reflects the law of supply, which states that, all else equal, producers are willing to supply more of a good or service as its price increases. This relationship is linked to the concept of increasing marginal costs. If marginal costs were constant or decreasing, the supply curve would either be horizontal or downward sloping, respectively.
It’s important to note that the increasing marginal cost of production does not explain the demand curve, which slopes downward due to the law of demand—people buy more of a good when its price falls, typically due to the substitution effect and income effect. Therefore, the increasing marginal cost of production is not related to the behavior of the demand curve.