Question

Which of these is the most likely effect of an increase in the cost of production?

A) a decrease in supply

B) a decrease in demand

C) an increase in demand

D) an increase in supply

E) all of the above

Answer 1

A) An increase in supply

Answer 2

Answer:

Option (A)

Explanation:

The cost of production refers to the amount that is required or used for the production of any material or substance. The supply rate is related to this cost of production. It is because the production cost is inversely proportional to the supply of goods. When the production cost increases, then the supply of goods decreases. And when the production cost decreases, the supply of goods increases.  

Thus, the decrease in the supply of goods is most likely an effect of the increasing production cost.

Thus, the correct answer is option (A).