Question

Read this scenario and answer the question that follows it. Sample scenario: A factory produces blue and green widgets, both at equal production costs. In one day, the factory can make 20 widgets of either color. The factory has been making 10 blue and 10 green widgets per day because they both sell for $5.00. Recently, the price of blue widgets has increased from $5.00 each to $8.00 each. How does the law of supply say the factory will respond to the increase in the price of blue widgets?

Answer 1

The law of supply says that the factory will respond by producing more blue widgets.

Under the current model, input costs aside, the factory stands to make $100 dollars a day if both blue and green widgets are priced at $5 a widget.

If the factory continued to make 10 blue and 10 green, the factory would stand to make 130 dollars a day (50 from green and 80 from blue).

If the factory ceased making green widgets and focused instead on blue widgets, the factory could be making $160 a day.

It is likely that the factory will want to keep a diverse stream to ensure wide customer satisfaction but the factory will definitely ramp up production of blue widgets.

Answer 2

Answer:

by increasing the number of blue widgets supplied

Explanation: