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A messenger company's main cost is gasoline for its vehicles. If the price of gasoline falls, lowering the company's production costs, what happens to the messenger company's supply curve for delivery services?
ASupply shifts to the left
BQuantity moves along the curve
CSupply shifts to the right
DSupply is completely unaffected
Answer & Solution
Correct answer: C. Supply shifts to the right
1. The price of an input, gasoline, is a supply determinant separate from the price the firm charges for its own service.
2. Lower input costs raise profit at any given selling price, so the firm wants to sell more.
3. A curve showing a higher quantity supplied at every price has shifted to the right.
4. Option B is wrong because this is a shift driven by a cost change, not a movement caused by the firm's own price changing.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 3 "Demand and Supply", section 3.2 | Shifts in Demand and Supply for Goods and Services_
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