Economics Supply Concepts Quiz

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Questions and Answers

What does an increase in the price of a product generally lead to according to the law of supply?

It shifts the supply curve leftward.

It causes a movement down along the supply curve.

The supply decreases.

The quantity supplied by firms increases. (correct)

Which event is likely to decrease the supply of laptop computers?

The number of laptop manufacturers increases.

Public demand for laptops decreases.

Technological advancements in laptop production.

The price of memory chips used in laptop computers rises. (correct)

What causes businesses to pay higher prices for labor?

The marginal cost of worker time increases as more hours of labour are supplied. (correct)

Sunk costs decrease as wage rates increase.

Workers have no opportunity costs.

The total cost of worker time decreases as more hours of labour are supplied.

What impact would a decrease in the number of pizza producers have on pizza supply?

Decrease supply of pizza. Signup and view all the answers

What characterizes the marginal benefit in a demand decision?

The marginal benefit is the satisfaction you get. Signup and view all the answers

Which scenario would likely cause an increase in the supply of economics textbooks?

An increase in the number of publishers of economics textbooks. Signup and view all the answers

What is the marginal opportunity cost of Joanna working at Club Karl?

$15 an hour. Signup and view all the answers

If Amber decides to bake more muffins and fewer cookies, what happens to her marginal cost for cookies?

The marginal cost of baking cookies increases. Signup and view all the answers

If there is a rise in the price of an input, what effect does it generally have on supply?

A decrease in supply or a shift to the left. Signup and view all the answers

What is true regarding the marginal cost of your time?

You give up the most valuable time last. Signup and view all the answers

How does a decrease in the price of mozzarella cheese affect the supply curve for pizza?

It increases supply of pizza. Signup and view all the answers

What defines a market in economic terms?

All of the above. Signup and view all the answers

Which of the following represents a sunk cost in the scenario of moving unexpectedly?

The cost of the carpeting. Signup and view all the answers

Which of the following would be considered a sunk cost when selling a used car?

The original purchase price of the car. Signup and view all the answers

For markets to function effectively, which condition must be met?

All parties must clearly know property rights. Signup and view all the answers

What is likely to happen to the marginal cost of labor as a business hires more employees?

Marginal cost increases as more hours are allotted. Signup and view all the answers

What portion of economic profits is affected by the interest you pay to the bank when borrowing money to start a business?

Subtracted from profits to determine economic profits Signup and view all the answers

What are the expected winnings from a raffle ticket with a 1-in-100 chance of winning $2,000?

$200 Signup and view all the answers

Given Nada's revenue of $95,000 and business expenses of $15,000, what are her economic profits?

$50,000 Signup and view all the answers

Which formula best defines accounting profits?

Revenues − Obvious Costs Signup and view all the answers

If a business has explicit costs of $300 and sells output for $450, which statement is true regarding its economic and accounting profits?

Economic profits are $150 Signup and view all the answers

What do normal profits represent in relation to implicit costs?

Sum of normal profits Signup and view all the answers

If accounting profits are $90,000 and economic profits are $50,000, what are the hidden opportunity costs?

$40,000 Signup and view all the answers

What occurs when economic profits are positive in an industry?

Businesses expand, pushing quantities up and prices down Signup and view all the answers

What is the primary function of anti-trust laws in the context of market competition?

Maintain and encourage competition in the market. Signup and view all the answers

Which option best describes a cartel?

A group of firms cooperating to maximize profits. Signup and view all the answers

What does the public-interest view of government regulation suggest about the purpose of regulations?

Regulations are designed to benefit the public while also considering industry needs. Signup and view all the answers

How do trade-offs address market failure?

By evaluating the government outcome versus the market failure outcome. Signup and view all the answers

According to the capture view of regulation, what is a likely outcome of government regulation?

Regulations often reflect the self-interests of the industries they regulate. Signup and view all the answers

What does evidence regarding the success of government regulation suggest about regulated natural monopolies?

They often achieve higher rates of return than the average in the economy. Signup and view all the answers

Which statement accurately describes the consequences of collusion among businesses?

It creates an environment where prices are fixed and supplies may be restricted. Signup and view all the answers

What is a possible result of price-fixing agreements in a market?

Price-fixing may drive agreements underground. Signup and view all the answers

What are the economic profits or losses for a business earning revenues of $80,000 with total costs of $35,000 and normal profits of $50,000?

$−5,000 Signup and view all the answers

What does the term short−run market equilibrium refer to?

Quantity demanded equals quantity supplied, but economic losses or profits can lead to changes in supply. Signup and view all the answers

When should a business owner consider entering an industry?

Economic profits are positive. Signup and view all the answers

In perfect competition, businesses are characterized as what?

Businesses are price takers. Signup and view all the answers

Which market structure is characterized by maximum pricing power?

Monopoly Signup and view all the answers

In a monopoly, how can a seller influence the price?

A seller can influence the market price. Signup and view all the answers

Which of the following is one of the characteristics of market structure?

Availability of substitutes. Signup and view all the answers

In the market structure of perfect competition, what is the relationship between market power and the elasticity of demand?

Market power is low and the elasticity of demand is high. Signup and view all the answers

What is the correct definition of wealth in economic terms?

Wealth is what you own, represented as a flow. Signup and view all the answers

When should a business consider hiring additional workers?

When marginal revenue product exceeds wage rate. Signup and view all the answers

Which statement correctly outlines the rule for maximizing profits?

Continue hiring as long as marginal revenue product exceeds the input price. Signup and view all the answers

How are input prices determined for resources like land or superstar talent?

Output prices dictate the determination of input prices. Signup and view all the answers

What factor most significantly influences the market-clearing price for rare labor inputs?

The marginal opportunity cost of the laborer's time. Signup and view all the answers

Why can economic rents persist in certain markets?

Barriers prevent new competitors from entering the market. Signup and view all the answers

What contributes to the high earnings of superstars in the market?

Market demand exceeds supply for their talents. Signup and view all the answers

How can poverty levels be effectively reduced?

Through education and training initiatives. Signup and view all the answers

Study Notes

Introduction to Microeconomics (York University) - ECON Final Exam Review

This document is a review for a final exam in introductory microeconomics at York University.
No personal information aside from the course name and university is included.
The document has several multiple choice and short answer questions relevant to the course.

Businesses and Worker Compensation

Businesses must pay higher prices to obtain more labor due to the increasing marginal cost of worker time.
Workers have opportunity costs.
Total cost of worker time increases as more hours of labor are supplied.
Sunk costs increase as wages increase.

Smart Supply Choices vs Smart Demand Choices

Sunk costs are not always greater than marginal costs in demand decisions.
Marginal benefit is the satisfaction derived.
Marginal cost is the opportunity cost of time.
Marginal cost increases with greater production.

Marginal Opportunity Cost

Marginal opportunity cost measures the loss of potential output when moving from one production option to another.

Sunk Costs

Influence decisions previously made.
are not part of marginal costs.
are not part of opportunity costs.
Examples of sunk costs are included in the document.

Market-Clearing Price

Equalizes quantity demanded and supplied.
- Represents a balance between consumer demand and producer supply for a given commodity.

Efficient Market Outcome

Marginal benefit equals marginal cost (MB = MC).
Consumers buy products and services when the marginal benefit is greater than the price.
Total surplus is the lowest when the allocation of resources is efficient.

Laptop Computers, Prices, and Supply

A rise in the price of memory chips used in laptop computers reduces the supply of laptop computers.

Pizza, Prices, and Supply

A decrease in the number of pizza producers or an increase in mozzarella cheese prices causes a decrease in the supply of pizza.

Economics Textbooks, Prices, and Supply

An increase in the number of publishers of economics textbooks increases supply.

Law of Supply and Price Changes

As the price of a product rises, the quantity supplied of that product increases.

Price and Quantity Supplied

Equilibrium price reflects market forces, and changes in either supply or demand lead to changes in the equilibrium price.

Marginal Cost, Benefit and Equilibrium

The process to identify marginal cost and benefits, and the conditions for market equilibrium.
Total surplus is maximized when marginal cost and benefit are equal.

Demand, Elasticity, and Price

Factors that cause an increase in quantity demanded include a fall in the price in a complimentary product, a rise in consumer income, and a drop in the price of a substitute product.

Consumer and Producer Surplus

Producer surplus occurs in the market when producers receive more revenue from the sale of goods and services than their cost of production.

Economic Models and Decisions

A good economic model leaves out unnecessary information, is testable, assumes other things remain constant
Decisions involve considering relevant variables, avoiding biases, and seeking accurate data to inform choices.

Comparative Advantage & Opportunity Cost

Understanding how specialization and opportunity costs affect production efficiency and trade.

Economical Concepts

Determining the differences in concepts between explicit, opportunity, and total costs
Distinguishing between explicit and implicit costs

Property Rights and Market Outcome

Property rights are enforced by governments in a market. This is important since they assure that incentives will be present for people to make productive choices.
Individuals and businesses devote more resources to producing if prices rise, because of the higher opportunity costs.

Price Ceilings and Market Equilibrium

Price ceilings set below equilibrium levels result in shortages.
Price floors set above equilibrium levels result in surpluses.

Labor Markets and Wage Rates

Minimum wage laws can negatively affect employment levels in industries not regulated by these wages.

Economic Efficiency and Economic Equity

Relationship between economic efficiency and equitable distribution of resources.

Microeconomic Issues

The various economic concepts discussed in the chapters on consumer, producer, and market behavior.

Externalities and Public Goods

Externalities and public goods, and methods to correct them.

Market Equilibrium

Market conditions that result in equilibrium situations.

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Description

Test your knowledge on key concepts related to the law of supply in economics. This quiz covers price changes, labor costs, supply changes, and the impact of market conditions on supply. Each question challenges your understanding of how economic principles apply in real-world scenarios.