Below is the amount of widgets that Adam, Robert, and Karl are each willing to make at three different prices.

PRODUCER $1 PER WIDGET $2 PER WIDGET $3 PER WIDGET

Adam 3 5 7

Robert 5 6 7

Karl 3 6 9

a. What is the primary incentive of each producer to make widgets?

b. What would happen to the supply of widgets if there was a technological advance that lowered the cost to make widgets? Explain.

c. Make a supply schedule for the whole market of widgets, based on these three suppliers.

d. Draw the market supply curve from the schedule in part (c). Label the curve S1.

e. On your graph from part (d), illustrate the effect of the technology advance on the supply of widgets. Label the new curve S2.

f. Assuming the market situation from part (b), and that producers will not charge less than $1, would the quantity supplied of widgets be more or less than 11 widgets? Explain.

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This are my answers:

(a) The primary incentive would be the price. As the price increases, each of the producer wishes to make more widgets to sell because they can earn a higher revenue as the price of the widgets keep increasing. This is consistent with the Law of Supply.

(b) If therearetechnological advancements which lowers the cost of making widgets, the supply of the widget will increase. If there is better machinery or technology available, each of the supplier will be able to produce a much higher number of widgets with lower price. Then each of the supplier will produce more, leading to higher number of widgets.

PART C AND D