The table given below reports the quantity demanded of a good by individuals 1, 2, and 3 at different prices.Table 3.1

-Which of the following is true of the law of supply?
A)The law of supply is the sole determinant of market prices.
B)The law of supply states that as the price of a good rises, the quantity supplied rises.
C)The law of supply holds good only in the long-run.
D)The law of supply is valid only in a market system of allocation.
E)The law of supply asserts that as the cost of producing a good rises, the quantity supplied rises.

Question

The table given below reports the quantity demanded of a good by individuals 1, 2, and 3 at different prices.Table 3.1
 
-Which of the following is true of the law of supply?
A)The law of supply is the sole determinant of market prices. 
B)The law of supply states that as the price of a good rises, the quantity supplied rises. 
C)The law of supply holds good only in the long-run. 
D)The law of supply is valid only in a market system of allocation. 
E)The law of supply asserts that as the cost of producing a good rises, the quantity supplied rises.

Quizplus · Accepted Answer

The law of supply states that as the price of a good rises, the quantity supplied rises. This means that producers are willing to supply more of a good at a higher price, as it becomes more profitable for them to do so. However, this does not mean that the law of supply is the sole determinant of market prices, or that it only holds true in the long run or in a market system of allocation. It simply describes the positive relationship between price and quantity supplied. Option E is actually the law of diminishing returns, which states that as more of one input is added to a fixed amount of other inputs, the marginal product of that input will eventually decline.

The Table Given Below Reports the Quantity Demanded of a Good