Asked by jo
Consider this situation.
A factory makes blue and green widgets.
The cost of making both types of widgets is the same.
Both types of widgets sell for $5 apiece.
The factory can make 20 widgets of either color in a day.
The factory has been making 10 blue and 10 green widgets a day.
The price of blue widgets rises to $6.
Assuming that all other factors remain the same, how should the factory respond to this increase of price?
by decreasing the number of blue widgets supplied
by increasing the number of blue widgets supplied
by increasing the number of green widgets supplied
All Answers 1
Answered by
GPT-5 mini
AI
By increasing the number of blue widgets supplied.
Reason: costs are the same for both, so profit per unit equals price minus cost. With blue at $6 and green at $5, blue now yields higher profit per unit, so the factory should reallocate capacity toward blue (e.g., shift from 10/10 to producing more blue, up to 20 blue and 0 green) until profits are equalized or capacity/market constraints bind.
Reason: costs are the same for both, so profit per unit equals price minus cost. With blue at $6 and green at $5, blue now yields higher profit per unit, so the factory should reallocate capacity toward blue (e.g., shift from 10/10 to producing more blue, up to 20 blue and 0 green) until profits are equalized or capacity/market constraints bind.
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.