ECON Ch. 3: Supply: Thinking Like a Seller

Based on the cost-benefit principle, the answer to the question, "Should I produce one more unit?" depends on:

the balance of marginal benefits and marginal costs.

The tendency for quantity supplied to be higher when the price is higher is called

the law of supply

When you apply the marginal principle, you should ask:

whether you should produce one more.

When market conditions change, each firm responds by changing its supply. When all individual supply curves shift, the market supply curve:

will shift also

Companies should keep _____ for as long as the price continues to be _____ marginal cost

expanding production; as large as

The marginal cost is the:

extra cost from producing one extra unit

If Akari decides to work the extra hours because she does not think any overtime will be offered in the near future, she is applying the....principle

interdependence principle

When your suppliers increase the prices of your inputs, they increase your _____, and this will shift your supply curve to _____.

marginal costs; the left

When your suppliers decrease the prices of your inputs, they decrease your _____, and this will shift your supply curve to _____.

marginal costs; the right

By applying the Rational Rule for Sellers, the firms can maximize the profits by continuing to produce until:

Price = Marginal cost

The marginal principle says that decisions about quantities are best made incrementally. Instead of asking "how many?" units to produce, you should ask

"Should I produce one more unit?"

Why does the supply curve NOT shift following a price change?

Because you can read the same graph to find the new quantity supplied

In the competitive market, the _____ states that you should sell one more item if the price is greater than (or equal to) the marginal cost

Rational Rule for Sellers

_____ are alternative uses of your production capacity

Substitutes-in-production

Which of the following factors will NOT shift an individual supply curve?

The number and type of sellers

The interdependence principle reminds you that your best choice as a seller

depends on many other factors beyond price

When you change the quantity of output you produce, _____ costs will not vary with the units of outputs.

fixed

When you are operating in a market with only a handful of buyers or a handful of sellers, it is likely that your firm:

has an influence on the price.

A shift in the supply curve is a:

movement of the supply curve itself.

Managers in perfectly competitive markets don't spend a lot of time strategizing about _____ because _____.

price; their best price is the market price

Productivity growth allows businesses to _____ and is a key force that firms can reduce their marginal costs through time.

produce more outputs using fewer inputs

The individual supply curve is _____ meaning that when the price _____, the quantities supplied would _____

upward-sloping; increases; increase

The _____ costs—like labors and raw materials—vary with the quantity of output you produce.

variable

When you draw an individual supply curve, price goes on the _____ and quantity is on the _____

vertical axis; horizontal axis. Remember: "P's before Q's."

When Niko considers whether she should pay for one more truck and driver, she is applying the......principle.

marginal principle.

a. Akari's boss has offered to pay her for up to 5 hours of overtime today. Akari has already been working for 10 hours and is deciding whether to work more hours. When Akari considers whether she should work one more hour, she is applying the.....princple

marginal principle

If Niko decides that paying for a new software upgrade is a better alternative than paying for additional trucks and drivers, she is applying the......

opportunity cost principle

If Akari decides to work overtime because her next best alternative is watching TV at home, she is applying the....principle

opportunity-cost principle

When Akari weighs the money she will earn from working overtime against what she gives up to work the extra hours, she is applying the...principle

cost-benefit principle

When Niko compares the cost of a new truck and driver to the benefit of increasing the package center's daily deliveries, she is applying the....principle

cost-benefit principle

If Niko decides to pay for additional trucks and drivers because she expects the coming season to be extremely busy, she is applying the.....principle

interdependence principle