Economics Chapter 5

A subsidy is

a government payment to support a business or market

Advances in technology usually

lower costs and increase supply at all price levels

The law of supply describes the relationship between

price and quantity supplied

If sellers expect the price of a good to rise in the future, they are likely to

store goods now and sell more in the future

A decrease in the cost of raw materials causes an increase in

supply

Marginal cost is

the cost of producing one more unit of a good

According to the law of supply

the higher the price, the greater the quantity produced

The change in output from adding one more worker is called

the marginal product of labor

A market supply curve shows

the quantity supplied by producers at different prices

The key factor that determines whether the supply of a good will be elastic or inelastic is

time

When a percentage change in price is perfectly matched by an equal percentage change in quantity supplied, elasticity is exactly one, and supply is

unitary elastic

Raw materials is an example of a

variable cost

When a business is calculating its operating costs, it must include

variable costs

If the market price for a beanbag is $24, and the marginal cost for the beanbag is $7, the marginal revenue from the beanbag would be

$24

The supply curve

always rises from left to right

A producer's profits are maximized when marginal costs

are equal to marginal revenue

Hair cutting is a business that has ____________ supply

elastic

____________ is a measure of the way suppliers respond to a change in price

elasticity of supply

Which of the following is NOT a fixed cost; building construction costs, rent, electricity or property taxes

electricity

Which of the following products is likely to have a built-in excise tax; shoes, apples, clothing and high-pollutant gasoline.

high-pollutant gasoline