Economics Ch.5 Study Guide
Fixed cost
costs that business owners incur no matter how much they produce
Variable Cost
costs that depend on the level of production cost
Total cost is the sum of...
fixed costs and variable costs
The difference between fixed costs and variable costs is that...
fixed costs remain the same; variable costs depend on how much is produced
The additional expense of producing one more unit of a product is called...
marginal cost
The change in total output that results from hiring one additional worker is called...
marginal product
Profit-maximizing output is the point at which...
marginal revenue and marginal cost are equal
Which of the following examples demonstrates elastic supply?
A CD fails to be hit, stores discount it by 30 percent, and the recording company lowers production by 50 percent.
Which of the following is an example of input costs affecting supply?
A toy maker reduces production because the price of lead-free paints rises
Which of the following is an example of supply?
Ann has a commercial oven and bakes wedding cakes for friends
Which of the following is an example of producer expectations affecting supply?
As oil prices rise, a bicycle factory increases production levels
An ice cream shop surveyed its customers about how many scoops they would buy at different prices. The owner wants to put the information in a format that will visually show the overall pattern. What should she do?
Draw a market supply curve
What happens when businesses hire too many workers?
Employees get in each other's way, causing disorganization and inefficiency
Why do businesses want to know what their profit-maximizing output is?
It is the point at which each unit produced is earning the highest possible profit
According to the law of supply, what happens when prices increase?
Quantity supplied increases
A small grocery store makes several technological changes. Which one will improve labor productivity?
Replace old cash registers with UPC scanners.
Which of the following is a fixed cost for a steel mill?
The chief financial officer is paid a salary
Profit-Maximizing Output
The point at which a business has reached its highest level of profit
Which of the following government regulations is most likely to help increase supply?
Workers safety on construction sites is strengthened
Why do small businesses often become more efficient when they add workers?
Workers specialize and divide tasks
Total Revenue
a company's income from selling its products
What is an excise tax?
a tax on the production or sale of specific goods or services
What is the most likely outcome when the number of producers of a particular product rises?
an increase in supply
The appearance of a supply curve is...
an upward slope, bottom left to top right
Car manufacturers who use robots to do certain jobs on the assembly line are trying to increase supply by...
applying new technology
What do the difference points along a supply curve show?
changes in quantity supplied
The government uses excise taxes to...
decrease the supply of products it doesn't want people to use
Which of the following lists contain only variable costs for an automobile factory?
electricity to run drills, wages, windshields
Which of the following are examples of government actions?
excise tax, regulation, subsidy
Specialization
having a worker focus on a particular aspect of production
The ease of changing production to respond to price change determines
how elastic a supply is
The amount of goods and services that a person can produce in a given time is called...
labor productivity
Supply curves are created using the assumption that all economic factors remain constant except...
price
Elasticity of supply measures how responsive...
producers are to price change
What motivates producers to increase supply?
profit
Business owners decide on the right number of workers by analyzing data to learn when...
profit-maximizing output is reached
According to the law of supply, when prices increases,
quantity supplied increases
What is it called when government controls business behavior through rules or laws?
regulation
What do both elasticity of demand and elasticity of supply measure?
responsiveness to price
Economists use a supply curve to...
show the law of supply in graph form
The desire and ability to produce and sell a product is...
supply
A supply schedule is a...
table showing how much of a product someone is willing and able to sell
Marginal Product
the change in total output brought about by adding one additional
What is the most common reason for supply to be inelastic?
the difficulty of changing the amount produced
Marginal costs
the extra cost of producing one more unit
marginal revenue
the money made from the sale of each additional unit of output
Total cost
the sum of fixed costs and variable costs
Supply is defined as...
the willingness and ability of producers to offer goods and services for sale
Which of the following is most likely to have elasticity of supply for their product?
wedding-cake baker
Increasing returns
when hiring new workers causes marginal product to grow
The law of supply states that...
when prices go down, quantity supplied goes down; when prices go up, quantity supplied goes up