In a competitive market, what does a market supply curve show?

• A. The relationship between consumers’ income and the quantity of a good demanded, holding the price constant
• B. The relationship between the market price of a good and the total quantity supplied by all sellers at each price, holding other factors constant
• C. The relationship between the market price of a good and the total quantity demanded by all buyers at each price, holding other factors constant
• D. The set of combinations of two goods that maximize a consumer’s utility given a budget constraint

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of a market supply curve. It represents how the total quantity of a good supplied by all sellers in a market changes in response to different prices, assuming other factors remain constant (ceteris paribus).
2. Step 2: Recognize that the market supply curve aggregates the individual supply curves of all sellers, summing the quantities each seller is willing to supply at each price level.
3. Step 3: Note that the market supply curve is typically upward sloping, reflecting that higher prices incentivize producers to supply more of the good.
4. Step 4: Differentiate the market supply curve from demand-related concepts, such as the demand curve, which shows the relationship between price and quantity demanded, or income effects on demand.
5. Step 5: Conclude that the market supply curve specifically shows the relationship between the market price of a good and the total quantity supplied by all sellers at each price, holding other factors constant.