When the demand curve is vertical and the supply curve is upward sloping a rise in...
When the demand curve is vertical and the supply curve is upward sloping
a rise in the input price increase marginal cost by $1, decreases the firm's profit by $1
a drop in the input that lowers the marginal cost by $1, doubles the firm's profit (wrong answer)
a drop in the input price that lowers the marginal cost by $1, decrease the output price by $1
a rise the input price that increase the marginal cost by $1, doubles the output price
Homework Answers
Answer
Option 3
a drop in the input price that lowers the marginal cost by $1, decrease the output price by $1
the demand curve is vertical and the supply curve is upward sloping when marginal cost decreases the supply curve shifts to the right which decreases price by the same amount as the MC because the quantity is the same and the same quantity supplied at lower prices.
the supply shifts from supply 1 to supply 2 by $1 which decreases the price by $1.
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