Why does a supply curve slope upward in microeconomics?

• A. Because production costs decrease as output increases.
• B. Because consumers demand less as prices increase.
• C. Because higher prices provide an incentive for producers to supply more of a good.
• D. Because government intervention always increases supply.

Answer: (C)

Verified step by step guidance

1. Understand that the supply curve represents the relationship between the price of a good and the quantity that producers are willing to supply.
2. Recall the law of supply, which states that, all else equal, an increase in the price of a good leads to an increase in the quantity supplied.
3. Recognize that higher prices provide an incentive for producers to increase production because they can cover higher marginal costs and earn greater profits.
4. Note that production costs typically increase as output increases, so producers need higher prices to justify supplying more units.
5. Conclude that the upward slope of the supply curve reflects the positive relationship between price and quantity supplied due to producers' profit-maximizing behavior.