Analysis of Supply

Analysis of Supply

Multiple Choice

The law of supply indicates that _____.

• the product supply curve is downsloping.

• consumers will purchase less of a good at high prices than they will at low prices.

• producers will offer more of a product at high prices than they will at low prices.

• producers will offer more of a product at low prices than they will at high prices.

Multiple Choice

A government subsidy to the producers of a product _____.

• increases product supply

• increases product demand

• reduces product supply

• reduces product demand

Multiple Choice

Suppose biochemists discover enzymes that can double the amount of ethanol that may be derived from a given amount of biomass. Based on this technological development, we expect the:

• supply curve for ethanol to shift rightward.

• supply curve for ethanol to shift leftward.

• demand curve for ethanol to shift leftward.

• demand curve for ethanol to shift rightward.

Multiple Choice

Which of the following would cause a shift to the right of the supply curve for gasoline?

i. A large increase in the price of public transport

ii. A large increase in the price of automobiles

iii. A large reduction in the costs of producing gasoline

• i only

• i and ii only

• iii only

• ii and iii only

Multiple Choice

Which of the following is an example of movement along a supply curve?

• The quantity of apples offered for sale increases as the price of apples rises.

• An apple orchard burns down in an accidental fire, decreasing the number of suppliers on the market.

• Because of good weather conditions, apple growers enjoy a bumper crop this year.

• The price of pears double, increasing the buyers desire to buy apples.

Multiple Choice

Suppose Mang Ambo is a farmer, he can use his land to grow and sell corn and rice. How would he respond to rising prices of corn?

• He will produce less of corn and more of rice.

• He will decrease the supply of rice and produce more corn.

• He will increase the supply of rice and corn.

• He will produce more of rice and corn.

Multiple Choice

if the price of silicon, a key resource used to produce microchips falls, the:

• product supply curve of microchips will shift to the right.

• product demand curve of microchips will shift to the right.

• product supply curve of microchips will shift to the left.

• product demand curve of microchips will shift to the right.

Multiple Choice

Some producers are chatting over a beer. Which one of the following quotations refers to a movement along the supply curve?

• "Our new, sophisticated equipment will enable us to undercut our competitors."

• “Prices of automobile is high so we need to produce more of it.”

• "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output."

• "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers."

Multiple Choice

Which of the following would NOT shift the supply curve for good X to the right?

• An increase in the price of Y, a complement in the production of X

• A decrease in the price of Y, a substitute for the production of X

• An improvement in technology affecting the production of X

• An increase in the price of X

Substitute-in-Production:

A substitute-in-production is one of two (or more) goods that is produced using the same resources in an either/or fashion. Supplies produce one good or the other, but not both. Devoting resources to the production of one good means they cannot be used to produce the other. An example is using farmland and other resources to produce one of two crops, either corn or soybeans.

Complement-in-Production:

A complement-in-production is one of two (or more) goods that is produced jointly with a given resource. One good is often produced as a bi-product of another. Producing one good does not prevent production of the other, but actually enables production of the other. Examples include beef and leather, both produced from the same cow.

Multiple Choice

The upward slope of the supply curve reflects the

• principle of specialization.

• rice and quantity inverse relationship.

• law of supply.

• law of diminishing marginal utility.