Option 1

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 S_1.

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