Chapter 5, Supply T/F

A change in price, other things constant, changes quantity supplied along a given supply curve.

true

A leftward shift of the supply curve indicates a decrease in supply.

true

In the short run, at least one resource is fixed.

true

Producers supply more of a product at a higher price than at a lower price, so the supply curve slopes upward.

true

Resources that can be adjusted quickly to change output are called variable resources.

true

The elasticity of supply equals the percent change in quantity supplied divided by the percent change in price.

true

In the short run, the total cost is the sum of a firm's fixed and variable costs of production.

true (double check)

Marginal revenue is equal to total revenue divided by the number of products sold.

true (double check)

The marginal cost of production is the change in total cost divided into the change in quantity.

true (double check)

what is a variable resource for a firm

labor

how do the determinants change the supply curve? left/right etc

Anything that affects production costs and profit opportunities helps shape the supply curve Increase- shifts right decrease- shifts left

what are the determinants of supply

Change in the cost of resources used to make the good Change in the Prices of Other Goods these resources could make Change in Technology used to make the good Change in Producer Expectations Change in the number of suppliers/sellers in the market

A change in price, other things constant, causes a shift of a supply curve either to the left or to the right.

False

Each year, millions of new firms enter the U.S. marketplace and only a few leave

False

The elasticity of supply indicates how responsive consumers are to a change in price

False

A firm breaks even when total revenue just covers total cost.

True

A firm faces two kinds of costs in the short run: fixed cost and variable cost.

True

A higher price makes producers more willing and better able to increase quantity supplied.

True

According to the law of supply, the lower the price for a product, the smaller the quantity supplied.

True

An increase in the cost of producing a product will cause the supply curve for that product to shift to the left.

True

Any change in the cost of resources used to make a good will affect the supply of the good

True

Each year, millions of new firms enter the U.S. marketplace and even more leave.

True

Elasticity of supply = Percentage change in quantity supplied ÷ Percentage change in price

True

Firms try to avoid diseconomies of scale.

True

Just as demand becomes more elastic over time as consumers adjust to price changes, supply becomes more elastic over time as producers adjust to price changes.

True

Profit = Total revenue - Total cost

True

With supply, the assumption is that producers try to maximize utility.

True

what does the law pf diminishing returns mean?

as more of one resource is added to a given amount of another, marginal product declines

what happens in the long run

all resources can be varied, a firm can enter or leave

the term quantity supplied refers to

amount offered at a specific price shown by a point

increase in the price of diesel fuel is likely to _____ costs of trucking companies and shift the supply curve for shipping products by truck to the _______

increase, right

as a small firm grows to become large what happens to the economies/diseconomies of scale?

economies of scale- firm is expanding average cost declines diseconomies of scale- firm is too big for its own good

Expecting higher prices in the future will prompt producers of these goods to increase their current supply.

false

In the long run, no more than one type of resource is fixed.

false

The law of diminishing returns is demonstrated when hiring additional workers increases total production by successively greater amounts.

false

elasticity of supply indicates

how responsive products are to price change (% change in quantity/ % change in price)

what could cause a market supply curve for a food product to shift to the right

increase in quantity

when price decreases a producer becomes ____ to supply the good

less able

what does economies of scale mean?

long run average cost declines as firm size increases

what happens when prices for a product change? (supply curve question)

movement in the supply curve (up or down)

law of supply states that the quantity of a good is usually directly related to its

price

how does elasticity change over longer periods of time

supply becomes more elastic

what happens when a firms total revenue falls short of its total cost year after year

the firm will fail