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Read the scenario.
Car Company X manufactures automobiles. Its costs of production have recently risen because the cost of electricity needed to
power the manufacturing plants have increased.
Which best describes the outcome of the above scenario?
O Car Company X will decrease the supply of automobiles it produces and likely will sell them at lower prices.
O Car Company X will decrease the supply of automobiles it produces and likely will sell them at higher prices.
O Car Company X will increase the supply of automobiles it produces and will sell them at lower prices.
Car Company X will increase the supply of automobiles it produces and will sell them at higher prices.
In the scenario provided, if Car Company X's costs of production have increased due to a rise in electricity costs needed for manufacturing, it would likely lead to a decrease in the supply of automobiles it produces. This is because higher production costs can reduce the company's profitability and efficiency, making it less feasible to produce the same quantity of cars as before.
When a company faces increased production costs, it may choose to limit its output to maintain profitability. This decrease in supply can also be accompanied by selling the automobiles at higher prices to offset the increased production costs and maintain profit margins.
Therefore, the most accurate description of the outcome of the scenario would be:
- Car Company X will decrease the supply of automobiles it produces and likely will sell them at higher prices.
By reducing the supply of automobiles and potentially increasing prices, Car Company X can adapt to the higher production costs while aiming to remain financially sustainable in the market.
