Ch 3.4-3.9 Final QUIZ

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 demand for a particular consumer

• How price changes affect supply for a market

• The impact of the substitute effect

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

• Suppliers leave the market.

• Consumers seek more of the good or 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

Which of the following would be an example of a fixed cost on a farm?

• Mortgage on the land

• Costs of seed

• Fuel to operate machinery

• Charge for fertilizer for the growing season

To increase marginal return, a company might consider

• stopping production.

• purchasing more machinery.

• increasing output.

• reducing output.

In general, it is a bad move for a company to produce more of a good or service if, by doing so,

• marginal cost exceeds marginal revenue.

• variable costs exceed fixed costs.

• demand exceeds supply.

• fixed costs exceed marginal revenue.

In determining the optimal level of output, a firm should aim for the

• point where decreasing returns become negative returns.

• output level where fixed costs exceed variable costs.

• point of maximum profitability for the company.

• output level where marginal returns are still increasing.

In which of the following situations would a business be wise to shut its factory?

• When revenue exceeds variable costs.

• When marginal costs exceed fixed costs.

• When fixed costs exceed revenue.

• When total costs exceed marginal costs.