#1
Which of the following is a fundamental principle of supply in economics?
Supply increases as price increases
ExplanationLaw of Supply: Higher prices incentivize producers to supply more.
#2
What is the law of supply?
As price increases, supply increases
ExplanationLaw of Supply: Higher prices motivate producers to offer more goods or services.
#3
Which factor does not affect the supply of a good or service?
Current market demand
ExplanationSupply is determined by factors other than immediate demand.
#4
What is the concept of elasticity of supply?
The responsiveness of quantity supplied to a change in price
ExplanationElasticity of Supply measures how producers adjust supply in response to price changes.
#5
How does the entry of new firms into a market typically affect supply?
Increases supply
ExplanationNew firms add to total market output, thus increasing overall supply.
#6
What role do expectations play in influencing supply?
Expectations can influence producers' decisions to supply more or less
ExplanationExpectations of future prices or demand can alter present supply decisions.
#7
What is the concept of 'opportunity cost' in the context of supply decisions?
The cost of forgoing the next best alternative when making a decision
ExplanationOpportunity cost: The value of what is foregone when choosing one alternative over another.
#8
In the context of supply, what is a 'substitute'?
A good that can be used in place of another good
ExplanationSubstitutes are goods that can replace each other in consumption or production.
#9
What is the concept of the production function in supply economics?
The relationship between input and output in the production process
ExplanationProduction Function: It shows how inputs like labor and capital translate into outputs.
#10
In the context of supply elasticity, what does it mean if the elasticity coefficient is greater than 1?
Supply is relatively elastic
ExplanationElastic Supply: When a small change in price results in a proportionately larger change in quantity supplied.
#11
What is the concept of a 'price floor' and its impact on supply?
A minimum price set by the government that can decrease supply
ExplanationPrice floors prevent prices from falling below a certain level, potentially reducing quantity supplied.
#12
How does the time horizon impact the supply elasticity of a good or service?
Shorter time horizons result in more elastic supply
ExplanationIn the short run, firms have limited capacity to adjust production, making supply less elastic.