How does a manufacturer set total output to maximize profit?

set production at the point where marginal revenue equals marginal cost

New machines in the factory make it faster and cheaper to make pencils. What will happen next?

Costs will go down and supply will go up.

What do sellers do if they expect the price of their goods to increase dramatically in the near future?

store the goods until the price rises

In what situation would a factory that is losing money keep operating?

if total revenue is greater than operating cost

When the price of a product goes down, what happens?

Some producers produce less, and others drop out of the market.

How does specialization affect production?

It makes workers more efficient.

Which is the best example of the law of supply?

A doll factory makes more dolls when the market price goes up.

Suppose the supply of oranges is inelastic. What will growers do if the price changes?

They will not produce more oranges

A hot summer causes demand for lemonade to go up. What happens next?

lemonade makers raise the price of lemonade.

What effect do rising input costs have on the price of a good?

The good becomes more expensive to produce.

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Econ Ch 5: Supply

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Questions 20

Answers

1
How does a manufacturer set total output to maximize profit?
set production at the point where marginal revenue is smallest
set production so that total revenue plus cost is greatest
set production at the point where marginal revenue equals marginal cost
set production so that marginal revenue and profit are the same
2
Both individual and market supply schedules show possible combinations of
profits and income.
goods and services.
volume and output.
price and quantity supplied.
3
New machines in the factory make it faster and cheaper to make pencils. What will happen next?
Supply and costs will both decrease.
Costs will drop, but supply will remain the same.
At first, supply will rise, but then it will decrease.
Costs will go down and supply will go up.
4
How does an increase in an excise tax on campers affect the supply of campers?
Fewer campers will be made.
Supply will increase.
Supply will stay the same.
More campers will be made.
5
How is profit determined?
marginal revenue plus marginal cost
total revenue minus total cost
marginal revenue minus marginal cost
total revenue plus total cost
6
She has ten dairy cows. The cost of feed goes up, but milk production stays the same. What does she do?
She raises milk prices.
She lowers milk prices.
She sells less milk.
She sells more milk.
7
What do sellers do if they expect the price of their goods to increase dramatically in the near future?
sell the goods now but try to get the higher price for them
store the goods until the price rises
sell the goods now and try to invest the money instead of resupplying
store the goods indefinitely regardless of when the price rises
8
When government intervention causes the supply of a good to rise, what happens to the supply curve?
It reverses direction.
It shifts to the left.
The supply curve is not affected.
It shifts to the right.
9
Which is a fixed cost?
all of the above
physical capital
salary wages
rent
10
In what situation would a factory that is losing money keep operating?
if total revenue is greater than operating cost
if marginal product of labor becomes negative
if total cost is greater than operating cost
if marginal revenue equals marginal cost
11
When the price of a product goes down, what happens?
New firms enter the market as older ones drop out.
Existing producers expand, and new producers enter the market.
Some producers produce less, and others drop out of the market.
Existing firms continue their usual output but earn less.
12
How does specialization affect production?
It increases cost.
It makes workers more efficient.
It slows down production.
It decreases revenue.
13
When the tenth worker is hired, the marginal product of labor becomes negative. Why does this happen?
The workers make too many goods.
Each worker makes more goods.
The demand for goods produced goes down.
There are too many workers.
14
Which is the best example of the law of supply?
A doll factory makes more dolls when the market price goes up.
A wheat mill builds a new factory overseas.
A farmer grows wheat to sell to a flour mill.
A restaurant buys a new dishwasher to make its work easier.
15
The price of cars rises. According to the law of supply, manufacturers will respond to this price increase by
increasing car production.
decreasing car production.
keeping car production steady.
halting car production.
16
Suppose the supply of oranges is inelastic. What will growers do if the price changes?
They will quickly produce more oranges
They will produce more oranges when the price drops.
They will have to respond to decreasing marginal returns of labor.
They will not produce more oranges
17
You want to open a factory that makes iced tea in bottles. Where is the best place to locate your factory?
in a rural area
near a farm that grows tea plants
near educated workers
near a large city
18
What is one reason governments give farmers subsidies?
to help people forget past shortages
to keep food supplies up
to increase the cost of production
to help farmers pay back debts
19
A hot summer causes demand for lemonade to go up. What happens next?
Stores import lemonade from overseas.
lemonade factories make less lemonade.
lemonade makers raise the price of lemonade.
Workers at lemonade factories go on strike and stop production.
20
What effect do rising input costs have on the price of a good?
The good becomes cheaper to produce.
It has no effect on the cost of the good.
The good becomes dependent on government regulation.
The good becomes more expensive to produce.

Econ Ch 5: Supply Flashcards | StudBud