Chapter 3: Supply: Thinking Like a Seller
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.
(i), (iii), (iv)
The accompanying table provides data for five different oatmeal cookie sellers. Out of the sellers listed, who all are following the law of supply?
Len, Ren, and Jen
Which of the following scenarios depicts a seller who is following the Rational Rule for Sellers?
American Airlines determines the marginal cost of an extra passenger to be $75 and sells a discount seat for $250
What is quantity supplied?
It is the amount of an item that a seller is willing to sell at a particular price
When you calculate marginal costs, they should include:
Only variable costs
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?
20 million gallons per week
Figure: Spice King Burgers' Supply Curve) Take a look at Spice King Burgers' supply curve for burgers. How many burgers will they supply at a market price of $1.50 per burger?
200 Units
(Figure: Graph) In the graph, the movement from point J to point K must have been caused by:
A fall in the price of an item
Which of the following lists only the factors that would cause a decrease in the supply of an item?
A rise in input prices; a decrease in the number of sellers in the market; a rise in the price of a substitute-in-production
Which of the following is NOT a factor that can shift supply?
The market price of a product
When plotting a supply curve
The quantity supplied goes on the horizontal axis
Why are supply curves typically upward-sloping?
They slope upward because higher prices lead individual businesses are willing to supply goods and services
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?
Diminishing Marginal Product
(Figure: Market for Coffee) A coffee shop opens next to an existing coffee shop. Which of the following graphs shows the effect of this new coffee shop on the market supply curve for coffee in this area?
Graph A
(Figure: Market for Luxury SUVs) Which of the following graphs shows what will happen to the supply curve for luxury SUVs, if economists predict an increase in demand for these vehicles?
Graph D
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
Variable costs are the costs that
Vary with the quantity of output produced
A market consists of ten similar suppliers that are making the same supply decisions. To find the market supply of these ten suppliers, you:
Multiply the individual supply of one of the suppliers by ten.
There are four suppliers in the packed meals market. The quantity of packed meals that each one is willing to supply per week at various prices is provided in the accompanying table. What is the change in the market supply for packed meals when the price falls from $6.25 per meal to $6.00 per meal?
The quantity supplied in the market falls by 149,000
There are four suppliers in the packed meals market. The quantity of packed meals that each one is willing to supply per week at various prices is provided in the accompanying table. What is the change in the market supply for packed meals when the price rises from $6.25 per meal to $6.50 per meal?
The quantity supplied in the market rises by 152,000