2.2 Supply

Supply requires that a producer is willing and able to sell at a given price over a given time period. All three elements must be present. Physical capacity alone does not constitute supply if the price is insufficient to justify production.

The manufacturer clearly has the productive capacity (raw materials, factory space) to produce 10,000 panels — the 'able' condition is met. However, because the market price is below break-even cost, it is not profitable to produce more than 4,000 units, meaning the firm lacks the economic incentive — it is not willing to produce more.

The scenario illustrates that physical ability ≠ supply. Only the quantity the firm is both willing and able to produce (4,000 panels) counts as supply. The correct answer is that the firm is able but not willing to supply at the current price.

The question tests whether students can distinguish between productive capacity (what a firm could produce) and actual supply (what a firm is willing and able to sell at the prevailing price).

The option stating the firm is willing but not able to produce more is incorrect — the question clearly states the firm has the raw materials and factory space, so the 'able' condition is satisfied. The constraint is profitability, not physical capacity.

The absence of an explicit time period in the scenario does not make supply undefined; the question is testing the willing/able distinction, not the time-period component. This option is a distractor.

Stating the firm has sufficient incentive to supply 10,000 panels directly contradicts the scenario, which says the price is below break-even cost — there is no incentive to produce beyond 4,000 units.

The remaining option — that the firm is able but not willing to supply at the current price — correctly identifies the component of supply that is not satisfied, making it the correct answer.

Market supply at any given price is calculated by horizontally summing the quantities supplied by every individual producer at that same price. We do not average or add prices — we fix the price and sum the quantities.

At a price of $8perkg:CompanyAsupplies200kg,CompanyBsupplies450kg,andCompanyCsupplies150kg.Marketsupply=$200 + 450 + 150 = 800$ kg.

The total market supply of salmon at $8 per kilogram is 800 kg. This is the single point on the market supply curve corresponding to this price.

The question requires adding the quantities supplied by all three firms at the same price level of $8 per kilogram to find market supply through horizontal summation.

850 kg would result from adding $200+450+200=850$, which incorrectly doubles Company A's quantity or makes some other arithmetic error. This is not the correct sum.

600 kg could result from adding only two of the three companies (e.g. $450+150=600$), omitting Company A entirely. Market supply must include all firms operating in the market.

750 kg might result from adding $200+400+150=750$, misreading Company B's supply as 400 kg rather than 450 kg. This is an arithmetic error.

The correct sum is $200+450+150=800$ kg. This is the market supply at $8 per kilogram.