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A rise in the wages paid to workers in a steel plant, other things remaining the same, would most likely cause the market supply curve of steel to:
Ashift to the left as production becomes costlier
Bshift to the right as production becomes cheaper
Cstay fixed while quantity supplied rises sharply
Dstay fixed while quantity supplied falls sharply
Answer & Solution
Correct answer: A. shift to the left as production becomes costlier
1. Wages are the price of a factor of production.
2. A rise in an input price raises the cost of production.
3. Higher cost makes the good less profitable, so less is offered at each price; this is a decrease in supply.
4. A decrease in supply is a leftward shift. The 'quantity supplied' options describe a movement, not a shift caused by a non-price factor, so they are ruled out.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.1_
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