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Firms will be willing and able to produce more output only when prices rise because the______cost of production is rising.

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Answer: Opportunity cost

Explanation: Firms would be very willing to produce goods with rising prices because the opportunity cost of production would also rise with the price.

The opportunity cost of production is the cost of producing a product as against other products, or what a company stands to gain when it produces a particular product instead of other products.

Therefore an increase in price of a product means that it would be very profitable to produce that product.

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User Guilherme Viebig
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