Economics Chapter 5 Flashcards

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Questions and Answers

What is supply?

The amount of a product that would be offered for sale at all possible prices (correct)

A graph showing the various quantities supplied at all possible prices

A government payment to encourage economic activity

The total output produced by the firm

What does the law of supply state?

Suppliers will normally offer more for sale at high prices and less at lower prices

What is a supply schedule?

A listing of the various quantities of a product supplied at all possible prices

A supply curve is a graph showing the quantities supplied at all possible prices.

True Signup and view all the answers

What is a market supply curve?

A supply curve that shows the quantities offered at various prices by all firms in a given market Signup and view all the answers

What is quantity supplied?

The amount that producers bring to market at any given price Signup and view all the answers

What is a change in quantity supplied?

The change in amount offered for sale in response to a change in price Signup and view all the answers

What is a subsidy?

A government payment to encourage or protect a certain type of economic activity Signup and view all the answers

Define supply elasticity.

A measure of the way in which the quantity supplied responds to a change in price Signup and view all the answers

What occurs during Stage I of the production function?

Total product rises, marginal product rises, increasing returns Signup and view all the answers

What happens during Stage II of the production function?

Total product slows, marginal product decreases, diminishing returns Signup and view all the answers

What happens during Stage III of the production function?

Total product decreases, marginal product is negative, negative returns Signup and view all the answers

What is the break-even point?

The point at which total cost and total revenue are equal Signup and view all the answers

When cost of production increases, supply typically decreases.

True Signup and view all the answers

What is the relationship between price and quantity supplied?

Direct Signup and view all the answers

What leads to a change in quantity supplied?

A change in price Signup and view all the answers

What happens when supply is elastic?

Quick, easy, and inexpensive to produce more Signup and view all the answers

What happens when supply is inelastic?

Slow, difficult, and expensive to produce more Signup and view all the answers

Match the following terms with their definitions:

Law of variable proportions = As you add input, you should expect varying levels of output Production function = Describes relationship between changes in output and input levels Break-even point = Point where total cost equals total revenue Profit-maximize quantity of output = When marginal cost equals marginal revenue Signup and view all the answers

Study Notes

Supply Fundamentals

Supply refers to the amount available for sale across all potential market prices.
The law of supply indicates suppliers provide more at higher prices and less at lower prices.
A supply schedule lists various quantities of a product at different price points.
Supply curves graphically represent quantities supplied against varying prices.

Market Dynamics

Market supply curves aggregate quantities offered by all firms in a particular market.
Quantity supplied is the amount producers are willing to sell at a specific price.
Changes in quantity supplied result from price fluctuations.

Variations in Supply

A change in supply reflects variations in amounts offered at all price points, influenced by factors beyond price.
Subsidies are government incentives provided to encourage specific economic activities.

Elasticity

Supply elasticity measures responsiveness of quantity supplied to price changes.
Goods are considered elastic if they can be produced quickly and at a low cost, whereas inelastic goods are slow and costly to produce.

Production Concepts

The production function details how total output changes with varying levels of a single input, typically labor.
Short run refers to periods where only variable inputs can be altered; long run allows for adjustments in all productive resources.
Total product signifies overall output, while marginal product indicates the additional output from adding a variable input.

Stages of Production

Increasing returns occur when additional input leads to a greater increase in output.
Diminishing returns arise as output growth slows with added inputs.
Negative returns happen when adding inputs leads to decreased total output.

Costs and Profitability

Fixed costs remain unchanged regardless of production activity levels.
The break-even point is where total costs equal total revenue, crucial for determining profitability.
Profit maximization occurs when marginal cost equals marginal revenue.

Supply Behavior and Market Interaction

A change in supply can occur due to factors other than price that affect selling decisions.
Higher production costs can lead to a decrease in supply.
Demand fluctuations can result in supply shifts, influencing pricing structures.

Summary of Supply Concepts

Supply represents all possible quantities at a price, while quantity supplied refers specifically to amounts at a certain price.
A supply curve slopes upwards, illustrating a direct relationship where rising prices correlate with increased quantities supplied.
Price effects are stronger with elastic goods and weaker with inelastic goods, influencing market decisions.

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Description

This quiz focuses on Chapter 5 of Economics, covering key concepts related to supply. Test your knowledge on essential terms such as supply, law of supply, and supply schedule. Perfect for students looking to reinforce their understanding of supply dynamics in the market.