Economics Chapter 5: Supply Flashcards

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Questions and Answers

What is the definition of Supply?

The relationship between factors of production and output

The quantities of output that producers will bring to market at each and every price (correct)

The total fixed cost incurred by a business

A movement along the supply curve

What does a Supply Schedule represent?

A table representing supply.

How is a Supply Curve represented?

Supply represented graphically.

What does the Law of Supply state?

The quantities offered for sale vary directly with its price Signup and view all the answers

What is a market supply curve?

Sum of the individual supply curves. Signup and view all the answers

A change in quantity supplied is represented by a shift of the supply curve.

False Signup and view all the answers

What does a change in supply refer to?

A change in the quantity that will be supplied at each and every price. Signup and view all the answers

What are Subsidies?

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

What is Supply elasticity?

Describes how a change in quantity supplied responds to a change in price. Signup and view all the answers

What does the Theory of Production deal with?

The relationship between the factors of production and the output of goods and services. Signup and view all the answers

In the short run, all inputs can be changed.

False Signup and view all the answers

The long run is a production period long enough for all inputs to vary.

True Signup and view all the answers

What does the Law of Variable Proportions state?

The quantity of output will vary as increasing units of a single input are added. Signup and view all the answers

What is a Production Function?

A way to present the Law of Variable Proportions. Signup and view all the answers

What is Total Product?

The sum of all product produced. Signup and view all the answers

What is Marginal Product?

The extra output gained from adding one additional unit of input. Signup and view all the answers

What are the Stages of Production?

Increasing returns, diminishing returns, and negative returns Signup and view all the answers

The diminishing returns stage occurs when output increases at a diminishing rate.

True Signup and view all the answers

What is Total Cost?

Sum of fixed cost and variable cost. Signup and view all the answers

What is Fixed Cost?

The cost that a business incurs even if the plant is idle. Signup and view all the answers

What does Overhead refer to?

Total fixed cost. Signup and view all the answers

What is Variable Cost?

A cost that changes when the business rate of operation or output changes. Signup and view all the answers

What is Marginal Cost?

The extra cost incurred when a business produces one additional unit of a product. Signup and view all the answers

What is Marginal Revenue?

The change in total revenue when one more unit of output is sold. Signup and view all the answers

What is the profit-maximizing quantity of output?

When marginal cost is exactly equal to marginal revenue. Signup and view all the answers

What is the Break-even point?

Total output or total product the business needs to sell in order to cover its total costs. Signup and view all the answers

Study Notes

Supply Concepts

Supply refers to the total quantities of goods and services producers are willing to sell at various prices.
A supply schedule displays the quantity supplied at different price points in a tabular format.
The supply curve graphically represents the relationship between price and quantity supplied.

Key Economic Principles

The Law of Supply states that if the price of a good increases, the quantity supplied also increases, and vice versa.
The market supply curve aggregates all individual supply curves to illustrate total market supply.

Supply Dynamics

A change in quantity supplied is shown as a movement along the supply curve.
A change in supply indicates a shift of the supply curve, affecting the quantity supplied at all price levels.

Influences on Supply

Subsidies are government payments aimed at encouraging certain economic activities, impacting supply levels.
Supply elasticity measures the responsiveness of quantity supplied to price changes.

Production Theory

The Theory of Production explores the link between production factors (labor, capital) and output levels.
Short-run production is characterized by the ability to change only labor input, while the long run allows for adjustments in all input types.

Variable Proportions

The Law of Variable Proportions explains how output changes with the addition of a single input, affecting production levels.
The Production Function is a formal representation of the Law of Variable Proportions in relation to input-output dynamics.

Output Metrics

Total product is the aggregate output produced by a firm.
Marginal product refers to the additional output generated from adding one more unit of input.

Stages of Production

Stages of production include increasing returns (growing efficiency), diminishing returns (declining efficiency with more input), and negative returns (output decreases).

Cost Analysis

Total cost is the sum of fixed and variable costs incurred by a business.
Fixed cost remains constant regardless of production levels, while overhead is the total fixed cost.

Variable and Marginal Costs

Variable costs fluctuate with changes in output levels or operational intensity.
Marginal cost is the expense incurred from producing an additional unit, which is critical for pricing and output decisions.

Profit and Revenue

Marginal revenue is the revenue change resulting from selling one more unit of output.
The profit-maximizing quantity of output occurs when marginal cost aligns exactly with marginal revenue.
The break-even point indicates the level of output needed to cover total costs without profit or loss.

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Description

This quiz focuses on key concepts related to supply in Economics Chapter 5. It includes important terms such as supply, supply schedule, supply curve, and the law of supply. Test your understanding of these foundational elements that shape market dynamics.