A firm's willingness to produce and supply is closely tied to which of the following?

A firm's willingness to produce and supply is fundamentally linked to the marginal cost associated with production. Marginal cost refers to the additional cost incurred by producing one more unit of a good or service. When a firm evaluates whether to increase production, it compares the marginal cost of producing additional units with the amount it can earn from selling those units.

If the marginal revenue from sales exceeds or equals the marginal cost, the firm is incentivized to produce more because this will lead to increased profit. Conversely, if the marginal cost exceeds the marginal revenue, production would decrease as it would not be financially beneficial. Thus, the decision to supply more of a product directly hinges on this relationship between marginal cost and marginal revenue, establishing the significance of marginal costs in a firm’s supply decisions.