The supply curve of a natural resource like oil has a positive slope because
A)the supply becomes closer to exhaustion as demand rises.
B)it becomes more costly to find and develop supplies as demand rises.
C)rents rise as output increases.
D)indirect taxes rise with output.

Question

Quizplus · Accepted Answer

As demand for oil rises, it becomes more expensive and difficult to find and develop new supplies. This leads to an increase in the cost of producing oil, resulting in a higher price for producers to sell their oil. As a result, the supply curve has a positive slope, reflecting the relationship between the price of oil and the quantity supplied. Choice A is incorrect because if the supply becomes closer to exhaustion, the supply curve would shift to the left, not increase in price. Choice C is incorrect because while rents may rise as output increases, this does not necessarily cause an increase in supply. Choice D is incorrect because indirect taxes do not directly affect the supply curve of a natural resource like oil.

The Supply Curve of a Natural Resource Like Oil Has