Chapter 3: Supply: Thinking Like a Seller

b) Diminishing marginal product

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes per day. What concept does this scenario illustrate? a) The marginal principle b) Diminishing marginal product c) The opportunity cost principle d) The cost-benefit principle

c) 20 million gallons per week

Consider the data in the table. The price of gasoline is $3.99 per gallon at the gas station. If Rexhall Fuel Supplies is a rational seller, how many gallons of gasoline should this seller be willing to sell? a) 14 million gallons per week b) 42 million gallons per week c) 20 million gallons per week d) 30 million gallons per week

a) multiply the individual supply of one of the suppliers by ten.

A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you: a) multiply the individual supply of one of the suppliers by ten. b) take the individual supply of one supplier. c) take one-tenth of the individual supply of each supplier and add it up. d) find the average quantity produced by the ten suppliers.

b) Len, Ren, and Jen

The accompanying table provides data for five different oatmeal cookie sellers. Out of the sellers listed, who all are following the law of supply? a) Ken and Ben b) Len, Ren, and Jen c) Len, Ken, Ren, and Ben d) Ren only

d) American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.

Which of the following scenarios depicts a seller who is following the Rational Rule for Sellers? a) An auto-rickshaw driver in New Delhi, India, calculates a trip to have a marginal cost of 350 rupees and accepts a ride request for 315 rupees. b) Andy's Diner finds that the marginal cost of a fish and chips meal is $7 and lists the item for sale at $6.50. c) Mindy sets up a lemonade stand and calculates the cost of an additional cup of lemonade at 50 cents, and sells it for 25 cents. d) American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250.

d) They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

Why are supply curves typically upward-sloping? a) They slope upward because sellers demand more when prices are lower. b) They slope upward because sellers prefer to sell more when prices are lower. c) They slope upward due to the law of demand. d) They slope upward because higher prices lead individual businesses to supply a larger quantity and more businesses are willing to supply goods and services.

c) greater than or equal to the marginal cost.

The Rational Rule for Sellers says that a seller should sell one more unit of an item if the price is: a) less than the marginal cost. b) greater than or equal to the marginal benefit. c) greater than or equal to the marginal cost. d) less than the marginal benefit.

d) vary with the quantity of output produced.

Variable costs are the costs that a) are incurred to build factories and assembly plants. b) stay fixed with the quantity of output produced. c) are independent of the amount of output produced. d) vary with the quantity of output produced.

b) It is the amount of an item that a seller is willing to sell at a particular price.

What is quantity supplied? a) It is a graph that plots how much a seller produces at different points in time. b) It is the amount of an item that a seller is willing to sell at a particular price. c) It is a graph that plots the quantities of an item that a seller plans to sell at different prices. d) It is the amount of an item that a buyer is willing to buy at a particular price.

a) only variable costs.

When you calculate marginal costs, they should include: a) only variable costs. b) the market price of the product. c) only fixed costs. d) both the variable and fixed costs.

(i), (iii), and (iv)

Which of the following are correct about fixed costs? (i) They do not change with the level of production in the short run. (ii) They include variable costs. (iii) They are present even when the firm is producing zero units. (iv) They are irrelevant to marginal cost.

b) The market price of a product.

Which of the following is NOT a factor that can shift supply? a) The price of a complement-in-production. b) The market price of a product. c) The price of a substitute-in-production. d) The expected future price of a product.