Increases in the prices firms pay for inputs causes a(n)
A) decrease in quantity supplied.
B) increase in supply.
C) increase in quantity supplied.
D) decrease in supply.
E) fall in output prices.

Question

Quizplus · Accepted Answer

An increase in the prices firms pay for inputs, such as raw materials or labor, will raise the costs of production and decrease the profit margin of firms. As a result, firms will be less willing and less able to supply the same quantity of goods and services at any given price level, leading to a decrease in supply. This shift in supply is shown as a leftward shift of the supply curve, indicating a higher minimum price required to sell the same amount of output.

Increases in the Prices Firms Pay for Inputs Causes A(n)