Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The supply curve will shift leftward, indicating a decrease in supply due to higher production costs.
B
The supply curve will shift rightward, indicating an increase in supply as the factory can now pay more to attract workers.
C
The supply curve will remain unchanged, as demand for labor does not affect production costs.
D
The supply curve will shift vertically, reflecting only the change in labor costs without affecting quantity supplied.
Understanding the Answer
Let's break down why this is correct
Answer
When a new factory opens and increases the demand for local labor, the factory needs to pay higher wages to attract workers. This increase in labor costs makes it more expensive for the factory to produce its products. As a result, the factory might produce less at the same price because it costs more to make each item. This situation causes the supply curve for the products to shift to the left, meaning that at any given price, the factory will supply fewer products. For example, if the factory used to produce 100 toys a day at $10 each, but now it can only afford to make 80 toys at the same price due to higher wages, the supply curve reflects this decrease in production.
Detailed Explanation
When labor costs go up, it costs more to make products. Other options are incorrect because Some might think higher wages mean more workers and more products; It's a common mistake to think labor costs don't matter.
Key Concepts
Supply and Demand Interactions
Market Equilibrium
Production Costs
Topic
Supply and Demand Interactions
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.