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
A
by increasing the number of green widgets supplied
B
by not changing the number of blue widgets produced
C
by increasing the number of blue widgets supplied
D
by decreasing the number of blue widgets supplied
Explanation
The law of supply says that, all else being equal, producers offer more of a good for sale when its price rises. Blue widgets now sell for $8 instead of $5, so the factory has an incentive to shift production toward blue widgets. Therefore, it will increase the number of blue widgets supplied.
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