Economics Quiz

What is the definition of supply?

• The amount of goods available.

• The amount of goods demanded.

• The price of goods.

• The quality of goods.

Answer explanation

The definition of supply is the amount of goods available, making the correct answer choice: The amount of goods available.

According to the law of supply, what happens when the price of a good increases?

• The quantity produced decreases.

• The quantity produced remains the same.

• The quantity produced increases.

• The quantity produced becomes zero.

Answer explanation

According to the law of supply, when the price of a good increases, the quantity produced increases.

What happens to the production of existing firms when the price of a good rises?

• They produce less.

• They produce more.

• They stop production.

• They maintain the same level of production.

Answer explanation

When the price of a good rises, existing firms produce more to take advantage of the higher selling price and increase their profits.

What incentive do new businesses have when the price of a good rises?

• To exit the market.

• To reduce production.

• To enter the market.

• To maintain the same level of production.

Answer explanation

New businesses have an incentive to enter the market when the price of a good rises in order to take advantage of potentially higher profits.

What might happen if the price of a good falls?

• Firms will produce more.

• Firms will produce less.

• New businesses will enter the market.

• The market will remain unchanged.

Answer explanation

If the price of a good falls, firms will produce less as they may not find it profitable to produce at a lower price.

What ultimately drives the supplier's decision?

• Government regulations.

• Consumer preferences.

• The search for profit.

• Market competition.

Answer explanation

The supplier's decision is ultimately driven by the search for profit, as businesses aim to maximize their financial gains when making choices.

What effect do rising prices have on market entry?

• They discourage new firms from entering the market.

• They draw new firms into the market.

• They reduce the quantity supplied of the good.

• They have no effect on market entry.

Answer explanation

Rising prices attract new firms into the market as they see an opportunity for higher profits, rather than discouraging them.

What is the result of new firms entering a market due to rising prices?

• The quantity supplied of the good decreases.

• The quantity supplied of the good remains the same.

• The quantity supplied of the good increases.

• The quantity supplied of the good is unaffected.

Answer explanation

The quantity supplied of the good increases due to new firms entering the market in response to rising prices.

What does a supply schedule show?

• The relationship between price and quantity supplied for a specific good.

• The relationship between demand and quantity supplied for a specific good.

• The relationship between price and quantity demanded for a specific good.

• The relationship between supply and demand for a specific good.

Answer explanation

The supply schedule shows the relationship between price and quantity supplied for a specific good, indicating how much of the good suppliers are willing to produce at different price levels.

What does a supply schedule list?

• Supply for a very specific set of conditions.

• Demand for a very specific set of conditions.

• Price for a very specific set of conditions.

• Quantity for a very specific set of conditions.

Answer explanation

A supply schedule lists the supply for a very specific set of conditions, detailing the quantity of a good or service that producers are willing to supply at various prices.