Antonio is skilled at making both earrings and bracelets. Antonio has no prefere

Question

Antonio is skilled at making both earrings and bracelets. Antonio has no preference between making earrings or bracelets since he earns the same amount from the two activities. If the selling price of bracelets decreases from $40 to $20, then Antonio's opportunity cost of making earrings and making earrings is now profitable than making bracelets. Suppose that the earrings market consists of several suppliers like Antonio who are skilled at making both earrings and bracelets. Which of the following is likely to happen to the supply curve of earrings when the price of a bracelets decreases? It shifts to the right It shifts to the left It does not change

Explanation / Answer

When the price of bracelets falls, making of earrings will become more profitable and the firms will shift towards making more earrings as compared to bracelets and thus the supply curve of earrings will shift towards right.

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