Ch 4

Supply is

• the quantity of output that firms are willing and able to produce at various price levels during a given time

• The inverse relationship between price and quantity supplied

• Total outpub of all producers in an economy per time period

• The quantity that consumers are willing and able to purchase at various price levels during a given time

Why do firms follow the law of supply?

• The income effect

• The law of diminishing marginal utility

• The profit motive

• The substitution effect

Which is NOT a non-price determinant of supply?

• Cost of production and factor inputs

• Government intervention

• Supply shocks

• consumer income levels

Which is NOT a supply shock?

• A severe drought

• Earthquakes

• Floods

• New indirect tax

Which is most likely to cause the level of supply in a market to decline?

• Change in price

• fall in the number of firms in the industry

• increase in the number of manufacturers in the industry

• outward shift in demand curve

a ___ along a supply curve happens if the ___ of a good or service changes

• Change/ costs

• Change/ supply

• Movement/ price

• shift/ price

How do you determine market supply?

• Add the individual producer supply curves

• Divide the individual producer supply curves

• Determine market consumer demand

• Add individual demand curves

What are marginal costs?

• cost of producing an additional unit of output

• cost of production in a given period of time

• cost of production divided by level of output

• extra profit as production increases by one unit of output

Which is an assumption of supply?

• decreasing marginal costs of production

• Large firms can sell their output at a lower price in order to remain competitive

• Law of diminishing marginal returns

• There is no change in indirect taxation or subsidies

Which is NOT true of the law of diminishing marginal returns?

• DMR will cause a firm's production costs to rise

• It can never occur in the short run

• It occurs in the short run, when at least one factor of production is fixed

• Degree of satisfaction from consuming a good eventually falls from higher levels of consumption