In a general equilibrium setting, the supply curves for final goods and services are determined by:
A)profit maximization by firms.
B)cost minimization by firms.
C)profit maximization by consumers.
D)utility maximization by consumers.

Question

Quizplus · Accepted Answer

In a general equilibrium setting, the supply curves for final goods and services are determined by profit maximization by firms. This is because firms aim to maximize their profit by producing output at a level where marginal cost equals marginal revenue. As the level of output increases, the marginal cost also increases, which means that firms have to charge a higher price to cover their costs and earn a profit. Therefore, the supply curve is upward sloping, reflecting the positive relationship between price and quantity supplied.

In a General Equilibrium Setting, the Supply Curves for Final