As the price of shipping services increases, the quantity supplied ________ as firms deploy ships and as
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As the price of shipping services increases, the quantity supplied ________ as firms deploy ships and as each ship travels ________.
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Application 4 SHORT-RUN SUPPLY CURVE FOR CARGO APPLYING THE CONCEPTS #4: Why is the short-run supply curve positively sloped? THE TEE Consider the supply of shipping services. The law of supply suggests that as the price of shipping increases, the quantity of shipping services will increase. At a relatively low freight rate of $2 per ton, only the most efficient ships operate, and they economize on fuel by traveling at a relatively low speed. As a result, the annual quantity of shipping services is only 70 units per year. At an intermediate freight price of $3 per ton, less efficient ships join the fleet. In addition, all the ships travel at a greater speed, using more fuel in the process. The combi- nation of more ships and faster travel increases the quantity of shipping services provided to 85 units per year. At a high freight rate of $7 per ton, the least efficient ships join the fleet and all the ships run at full speed. As a result, the quantity of shipping services increases to 96 units per year.
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Related Book For
Microeconomics Principles Applications And Tools
ISBN: 9780134078878
9th Edition
Authors: Arthur O'Sullivan, Steven Sheffrin, Stephen Perez
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