Question

Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers
(A) will determine what price to produce at given the market demand.
(B) can also be interpreted as shifts of their respective marginal cost curves.
(C) at all levels of output shift marginal costs to the right.
(D) shift marginal costs to the right enabling both to produce more at any given market price.

Answer 1

Answer:

(B) can also be interpreted as shifts of their respective marginal cost curves.

Explanation:

Marginal Cost represents the total cost increase that occurs when the quantity of goods produced is increased by one unit (or the total cost reduction after the reduction by one unit in the quantity produced). By the Law of Decreasing Marginal Income, Marginal Costs are increasing as more units of good are produced because, from a certain point, to get one more unit produced it is necessary to add more and more units of the productive factor.

With this, we can conclude that the resulting changes in supply curves for coal miners and electricity producers in relation to increased demand for these goods can also be interpreted as changes in their respective marginal cost curves.