Why is the supply curve typically upward-sloping in microeconomics?

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

Answer: (B)

Verified step by step guidance

1. Understand that the supply curve shows the relationship between the price of a good and the quantity that producers are willing to supply.
2. Recognize that an upward-sloping supply curve means that as the price increases, the quantity supplied also increases.
3. Recall the economic principle that higher prices provide an incentive for producers to increase production because they can earn more revenue per unit sold.
4. Note that this incentive arises because higher prices can cover the higher marginal costs of producing additional units, motivating firms to supply more.
5. Conclude that the supply curve is typically upward-sloping because producers respond to higher prices by increasing the quantity they supply.