Question

The supply curve for an artificially scarce good is .

• A. A vertical line at a price of zero
• B. A vertical line at the market price
• C. A horizontal line at a price of zero
• D. A horizontal line at the market price

Hint:

Think about the marginal cost of adding one more user to a non-rival good.

Answer 1

The Correct Option is C

Think about what makes a good artificially scarce. Examples are things like a satellite TV channel or an uncongested toll road: once the broadcast or road is built, adding one more viewer or driver costs the provider almost nothing. So the true marginal cost of production, which is what a supply curve tracks, stays at zero no matter how many units are supplied. The scarcity here is not due to production cost but due to a company choosing to exclude non-paying users with a price, which is why it is called artificial. A supply curve that shows marginal cost equal to zero at every quantity is drawn as a flat line sitting on the zero-price axis. \[\boxed{\text{A horizontal line at a price of zero}}\]