Economics 10 Q2 - Supply

According to the law of supply, which of the following is true, ceteris paribus?

• As the price of a good decreases, the quantity supplied increases

• As the price of a good increases, the quantity supplied decreases

• As the price of a good increases, the quantity supplied increases

• The relationship between price and quantity supplied is always constant

Which of the following best explains the direct relationship between price and quantity supplied in the law of supply?

• Higher prices increase production costs, which reduces supply

• Higher prices provide an incentive for producers to increase output to earn more profit

• Lower prices result in more efficient production methods, leading to higher supply

• Producers always supply the same quantity, regardless of price changes

One key assumption behind the law of supply is:

• All other factors, such as technology and input prices, are held constant

• Producers can adjust supply instantaneously in response to price changes

• Prices of substitute goods affect the law of supply

• Demand is always increasing as supply increases

The law of diminishing marginal returns states that:

• Adding more of a variable factor, such as labor, will always increase total output

• Adding more of a variable factor to a fixed factor will eventually result in decreasing additional output

• Marginal returns are highest when only one unit of input is added

• Marginal returns increase as more units of input are added

Which of the following situations illustrates the law of diminishing marginal returns?

• A company hires more workers and initially sees large increases in output, but as more workers are added, each additional worker contributes less to total output

• A business invests in better technology, increasing its productivity

• A factory is able to produce more goods because it expands its facility

• A producer decreases the price of a good, which increases sales volume

Why do firms experience increasing marginal costs in production?

• Due to diminishing marginal returns, producing each additional unit becomes more costly as more inputs are required

• Marginal costs always increase because technology becomes outdated

• Firms experience increasing marginal costs because demand rises as prices decrease

• Marginal costs are constant regardless of the production level

The supply curve typically slopes upward because:

• Producers can always increase production with the same resources

• Higher prices provide an incentive for firms to produce more

• Higher prices discourage producers from supplying more goods

• Marginal costs always decrease as production increases

Which of the following is a non-price determinant of supply?

• Changes in the price of the good

• Changes in technology

• Changes in consumer preferences

• Changes in the price of substitutes

Which of the following events would cause a rightward shift in the supply curve for a good?

• An increase in the wages of workers producing the good

• The introduction of a new technology that lowers production costs

• An increase in the price of the good

• A decrease in the price of complementary goods

A movement along the supply curve occurs due to:

• A change in the price of the good itself

• A change in the cost of inputs

• A change in government regulations

• A technological innovation