Chapter 3 Practice Exam

As an equity analyst with an investment management company, you monitor market conditions in the dairy sector. Which of these would shift the market supply curve you've modeled for milk?

expectations of a future decline in the price of milk

(Figure: Four Supply Curves) If companies frequently start using drones to deliver products, which graph shows the effect this will have on the market for drones?

graph a

(Figure: Four Supply Curves) Which of these graphs shows what will happen in the market for bread if the price of organic wheat used in bread production rises?

graph c

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is:

greater than or equal to the marginal cost.

Diminishing marginal product leads to:

rising marginal costs for a seller.

Consider the data in the table. The price of gasoline is $3.99 per gallon. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should it be willing to sell?

20 million gallons per week

Metformin, a diabetes drug, is produced as a generic by Glumetza. The marginal cost of producing a bottle of Metformin is indicated in the table below in 1,000 unit increments per day. If the market price of Metformin is $11.65, how many bottles of Metformin should Glumetza produce per day to maximize its profits?

3000

Paper producers can manufacture both printing paper and drawing paper. What effect would rising prices for printing paper have on the supply of drawing paper?

The supply of drawing paper will decrease.

(Figure: Gasoline Supply Curves) Three gas stations make up the market for gasoline in your town. The number of gallons of gasoline that each gas station is willing to supply per week at various prices is indicated in the accompanying table. Which curve in the following diagram represents the market supply curve?

c

(Figure: Multi-Family Apartment Supply Changes) The building contractor Wise Choice Construction is initially at point E in the multi-family apartment building market. When prices of single-family homes rise, Wise Choice starts to build more single-family homes and fewer multi-family apartment buildings. Which point represents a plausible supply choice for the company in the multi-family apartment building market?

c

A farmer finds that when he produces more pumpkins, he also has more pumpkins he can sell as decorations. To the farmer, pumpkins and decorative pumpkins are:

complements in production.

In employing the marginal principle, a seller may:

decide whether to supply one more unit of a good or service.

(Figure: Graph 2) In the graph, the movement from point L to point K is caused by a(n):

increase in the price of the item.

The _____ is the increase in output that is produced when a business hires an additional worker.

marginal product

The law of supply refers to the:

positive relationship between price and quantity supplied

You run an electronics store that sells, among other items, big screen televisions. As the market price of big screen televisions decreases, the:

quantity of big screen televisions supplied decreases.

If the price of jet fuel rises, the:

quantity of jet fuel supplied will increase.

When plotting a supply curve, you measure:

quantity supplied on the horizontal axis.

Henderson Lumber is a lumber mill that produces both boards used in construction and sawdust, a byproduct of the board production, used in agriculture. When the housing market collapses, causing house prices along with the prices of boards used to build houses to fall, Henderson Lumber's _____ will likely _____.

supply of sawdust; decrease

While attending college, you are also working as a freelance writer, writing product descriptions for catalogues for $40 per piece. You start each morning writing product descriptions when your mind is fresh. However, at a certain point, you recognize that the more product descriptions you write, the less quality time you can devote to your studies, worsening your grades and somewhat dampening your long-term income prospects. You should stop writing product descriptions when:

the perceived opportunity cost of writing another product description in terms of foregone long-term income rises above the $40 you could earn writing another product description.