Question

Which of the following statements is (are) TRUE?

Answer 1

Answer:

All of the options are true.

Explanation:

I. As market prices increase, industry output rises because individual firms have upward-sloping marginal cost curves.

As the price of a product or service increases, suppliers will be willing to increase output because marginal costs should decrease as production increases (economies of scale).

II. As market prices increase, industry output rises because high-cost producers enter the industry.

As the price of a product or service increases, more suppliers will be willing to enter the market since the profit margins increase.

III. As market prices increase, industry output rises because individual firms have upward-sloping short-run supply curves.

As the price of a product or service increases, suppliers will be willing to increase production output because their profit margins should increase due to decreasing marginal costs, until they reach a limit where marginal costs start to increase and profit margins decrease.