Questions and Answers
What is supply?
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.
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What is a market supply curve?
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What is quantity supplied?
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What is a change in quantity supplied?
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What is a subsidy?
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Define supply elasticity.
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What occurs during Stage I of the production function?
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What happens during Stage II of the production function?
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What happens during Stage III of the production function?
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What is the break-even point?
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When cost of production increases, supply typically decreases.
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What is the relationship between price and quantity supplied?
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What leads to a change in quantity supplied?
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What happens when supply is elastic?
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What happens when supply is inelastic?
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Match the following terms with their definitions:
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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.