Question

Sam is skilled at making both necklaces and earrings. Sam has no preference between making necklaces or earrings since he earns the same amount from the two activities. If the selling price of earrings decreases from $40 to $20, then Sam's opportunity cost of making necklaces ______________ and making necklaces is now ______________ profitable than making earrings. Suppose that the necklaces market consists of several suppliers like Sam who are skilled at making both necklaces and earrings. Which of the following is likely to happen to the supply curve of necklaces when the price of a earrings decreases?
A. It does not change
B. It shifts to the left
C. It shifts to the right

Answer 1

Answer and Explanation:

Since in the question it is mentioned that Sam is skilled in both necklaces and earrings also he has no preference and the same amount is earned

In case when the selling price of earring reduced from $40 to $20 so the opportunity cost of necklace is decreased so automatically it would be more profitable

Also when the price is decreased so the supply curve would be shifted to the right