Economics topic 3 lessons 4-6 test

A new film company's decision to locate its operations in the film-production center of Southern California is most similar to which of the following?

A firm coating close to the inputs of its products

This warehouse holds goods that help meet consumer demand. Make Predictions Consumers' demand is sensitive to price levels. How do you expect price to affect supply? Explain your answer.

As price increases, supply goes up. As price decreases, supply goes down.

Which factor causes firms to increase production when the price of a good or service goes up?

Desire for profits

What does this traffic jam show about China?

It shows that they use a lot of petroleum and they have made cars affordable to many

Cranberry vines take three to four years to produce fruit. How sensitive to price changes would the product be?

It would be inelastic in supply

How would the decision by a beanbag factory to add more sewing machines affect marginal returns?

It would increase marginal returns.

Suppose the price for a good changed by 100 percent and in response the quantity supplied changed by 50 percent. Explain whether supply is elastic or inelastic in this case.

Supply is elastic in this case

Which of the following government actions would increase the supply of cars in the United States?

The removal of car mileage regulations

In general, it is a bad move for a company to produce more of a good or service if, by doing so,

marginal cost exceeds marginal revenue

Why do governments impose excise taxes on some goods?

to discourage consumption of those goods

How do you calculate profit per hour?

Total revenue - total cost

Which factor would shift the supply curve for ethanol in the United States to the right?

A trade agreement with Brazil opening US markets to imported ethanol

Fads like the popularity of these stuffed animals cause demand to spike. Solve Problems a. Does demand stay high when a fad is involved? b. How should suppliers respond to fads?

A. Demand doesn't usually stay long-term during a fad B. Suppliers should produce more, but only for a short amount of time

Analyze Graphs a. How much pizza will the individual pizzeria supply per day at $3 a slice? b. How much pizza will the market supply each day at $4 a slice?

A. The individual pizzeria will supply 200 pizzas per day at $3 B. The market will supply 2500 pizzas day at $4

Can adding workers to a factory like this increase marginal returns? Identify Central Issues What is helping this woman work productively?

Adding workers can help increase marginal returns. The fact that there are more workers and that she can specialize is helping the woman work productively.

Consider each of these business activities. For which do you think supply would be most elastic in the short term?

Baking cupcakes

What can regulations add? Example shown is regulations about the removal and disposal of hazardous wastes from factories

Cost to business that can affect supply

What is the effect of lower input costs?

Decreased marginal cost

An anticipated rise in prices should cause supply in the short term to

Fall

What's the formula for total cost?

Fixed cost + variable cost

This retailer has quickly expanded supply by adding hours. Solve Problems What other step can retailers take to increase supply quickly?

He can hire more workers to increase supply.

Excessive regulation slows innovation, imposes needless costs on investors, and stifles competitiveness and job creation. —Henry M. Paulson Jr., Secretary of the Treasury, washingtonpost.com, Nov. 11, 2006 What does this quote state about Henry's opinion of regulations?

He feels as if rules restrict people and not let them think outside of the box.

What does a firm's supply schedule show?

How price changes affect supply for a market

Changes in input costs can affect the supply of several goods or services. Make Generalizations What generalization can you make about the relationship between input costs and supply?

I can tell that at times that costs of certain materials can change if a good or service is needed. In this case, the supply changes for the material. In the case of silicon chips for example, could change the cost of computers and the supply for computers change as a result.

Many governments subsidize agriculture, though rates vary greatly from nation to nation. Generate Explanations Why do you think subsidies change slightly from year to year?

I think subsidies change from year to year because various subsidies are offered and they mostly come in different prices

This schedule shows how many slices one pizzeria owner will supply at different prices. Analyze Charts What would you expect from this pizzeria if prices rose to $7 a slice?

I would expect more slices to be supplied

This schedule shows how many slices all pizzerias in a market will supply at different prices. Analyze Charts What would you expect to happen in this market if prices dropped to $.50 a slice?

I would expect the pizzeria to supply less pizza

How does expectation of future prices affect supply?

If future prices rise are expected to rise, supply will fall in the short term. If future prices are expected to fall, supply will rise in the short term.

The price of a good determines how much of that good a supplier will provide. Contrast How is the law of supply different from the law of demand?

In the law of supply, quantity supplied goes along with price as opposed to the law of demand where quantity demanded and price go opposite of each other.

Marginal product of labor is the change in output that results when a unit of labor is added. Analyze Charts How does marginal product of labor change when a fourth worker is added?

Marginal product of labor goes down when a fourth worker is added

Which of the following typically happens as prices for a good or service rises?

More suppliers enter the market

Which of the following would be an example of a fixed cost on a farm?

Mortgage on the land

To increase marginal return, a company might consider

Purchasing more machinery

Which variables does a supply schedule show?

Quantity supplied and price

The law of supply declares which of the following?

Supply falls as price falls

It makes sense for producers to increase quantity supplied when prices rise. Connect What assumption underlies the decision to increase quantity supplied as price increases?

The assumption of getting more revenue underlines the decision to increase quantity supplied as price increases

Analyze Political Cartoons Explain the significance of the large stack of papers.

The large stack of papers show how many things are actually regulated by the government. This includes all the operations in industries and the various recommendations made to schools.

It makes sense to keep a factory operating if revenue exceeds operating costs. Analyze Charts What is the lowest market price this producer could accept given its costs?

The lowest market price would be $6

This graph shows the rise and fall in marginal product of labor for the beanbag factory. Analyze Graphs What is the marginal product of labor when a fifth worker is added?

The marginal product of labor is 5 beanbags per hour when a fifth worker is added. Marginal returns are diminishing in this case.

Changes in price lead to a change in the ideal level of output. Analyze Graphs Based on this graph, what should output be if the price fell to $20?

The output should be about 5-6 beanbags

What does it mean to say that supply is unitary elastic?

The percentage change in price and in supply are the same

What could businesses do to this abandoned power plant?

They could close or dispose it

Non-price determinants that alter supply shift the entire curve to the right or left. Check Understanding How do supply shifts differ from changes in quantity supplied based on price?

They differ from changes in quantity supplied due to the fact that these determinants can have an impact. For example, an additional box donated could shift the curve to the right due to more quantity supplied being offered.

How do subsidies help producers?

They increase revenues

In the United States, government subsidizes the building of these commercial aircraft. Draw Conclusions Why might government subsidize this industry?

They might subsidize this industry because they want to support aircraft companies and their mission to make transportation by flight more efficient.

What will the workers do if the price of clothing rises?

They will supply more of it.

This simple formula identifies the ideal level of output for producers. Synthesize What would a smart producer do if marginal costs were lower than the market price?

They would produce more of the product and make a profit since the marginal cost is lower.

Producers must identify costs and revenues to calculate profit—total revenues minus total costs. Apply Concepts Why might this factory not seek the highest possible revenue?

This factory might not seek the highest possible revenue because they might want to make profit more carefully

Why would two similar businesses operate next to each other usually?

To supply the same product

All producers need to understand their fixed, variable, and total costs. Explain Which categories of cost would increase for a business that decided to extend its hours of operation?

Variable costs will increase

In which of the following situations would a business be wise to shut its factory?

When fixed costs exceed revenue

When do ideal output levels occur?

When the price paid at a market = marginal cost to produce good

What would a business do to maximize profits?

a business must identify the amount of labor that will enable the company to achieve the widest gap between revenue and costs.

Which of the following explains why firms differ in elasticity of supply in the short term?

ease of changing quantity supplied quickly

What costs might a factory that closes its doors and stops producing goods still face?

fixed costs

In which direction does the supply curve shift when input costs increase?

left

In determining the optimal level of output, a firm should aim for the

point of maximum profitability for the company

What do the inputs for this ring include?

the expensive gems and metals, as well as the labor.

A firm that is losing money should nevertheless choose to continue operating if its

total revenue is greater than its variable costs.