Question

The operations vice president is adjusting the production quantities for the upcoming month of March for the coal company. Last month the price of a ton of coal was $45, and in February it increased to $64 per ton. According to the law of supply, what would be a rational response of the VP of operations in adjusting his coal output with the change in the market price?A. Reduce output and layoff workers.B. Increase output and hire more workers.C. Shut down 2 out of the 4 mining sections in the coal mine

Answer 1

Answer:

The correct answer is letter "B": Increase output and hire more workers.

Explanation:

According to the supply law, if the price increases so will the quantity supplied and if the price decreases the same will happen with the quantity supplied. We could say that the relationship between price and quantity supplied is directly proportional.

In the example, as the price of coal increased so will the quantity supplied. If there is to be more supply the output should be higher which is likely to be interpreted in a need for more employees.