3.4 Fundamentals of Supply

Which factor causes firms to increase production when the price of a good or service goes up?

• desire for profits

• Increase in demand

• need to unload inventory

• reduction in cost

Which variables does a supply schedule show?

• quantity demanded and price

• quantity demanded and quantity supplied

• quantity supplied and price

• quantity supplied by individual firms and the market

Which of the following explains why firms differ in elasticity of supply in the short term?

• quality of decision-making

• ease of changing quantity supplied quickly

• inability to understand the law of supply

• changes in the market demand

The law of supply declares which of the following?

• supply falls as price falls

• supply increases as price falls

• supply stays the same no matter how prices change

• supply falls as prices increase

What does a firm's supply schedule show?

• elasticity of demand

• how price changes affect supply for a market

• the impact of the substitute effect

• how price changes affect demand for a particular consumer

Which of the following typically happens as prices for a good or service rises?

• suppliers leave the market

• consumers seek more of the good of service to consume

• demand becomes increasingly elastic

• more suppliers enter the market

What does it mean to say that supply is unitary elastic?

• Supply does not change with changes in price.

• Supply is very sensitive to changes in price.

• The percentage change in price and in supply are the same.

• A change in supply is observed only if price increases.

Consider each of these business activities. For which do you think supply would be most elastic in the short term?

• Producing feature movies

• Building skyscrapers

• Providing health care

• Baking cupcakes