Rising prices increase quantity supplied because of higher profits and the need to cover increasing marginal opportunity costs.

Question

Quizplus · Accepted Answer

When prices rise, producers/suppliers can earn higher profits and are therefore incentivized to increase production to capture these profits. Additionally, as production increases, marginal opportunity costs (the cost of producing one additional unit) also increase, which means suppliers need higher prices to cover those costs. These factors combine to lead to an increase in quantity supplied.

Rising Prices Increase Quantity Supplied Because of Higher Profits and the Need