📚 Learning Guide
Impact of Input Costs on Supply
easy

If the cost of fabric used to make bandanas decreases, which of the following statements are true regarding the supply of bandanas in the market? Select all that apply.

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Choose the Best Answer

A

The supply of bandanas will increase.

B

The price of bandanas will likely decrease.

C

Consumers will demand fewer bandanas.

D

Producers may experience higher profit margins.

E

The overall quantity of bandanas supplied will remain unchanged.

Understanding the Answer

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Answer

When the cost of fabric used to make bandanas decreases, it becomes cheaper for producers to make them. Because it costs less to produce each bandana, manufacturers can supply more bandanas to the market without raising prices. This increase in supply means that at every price level, more bandanas will be available for consumers to buy. For example, if a company used to make 100 bandanas per week at a higher fabric cost, they might now make 150 bandanas per week because the fabric is cheaper. Therefore, the supply of bandanas in the market increases when the cost of fabric decreases.

Detailed Explanation

When the cost of making bandanas goes down, producers can make more of them. Other options are incorrect because This option suggests that supply will increase, but it is marked wrong; This option says prices will likely go down.

Key Concepts

Input Costs
Supply
Consumer Behavior
Topic

Impact of Input Costs on Supply

Difficulty

easy level question

Cognitive Level

understand

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