True/False
Indicate whether the
sentence or statement is true or false.
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1.
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Productivity will decrease if workers are unmotivated.
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2.
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If producers expect lower prices in the future, they may withhold some of the
supply.
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3.
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The theory of production deals with the relationship between the factors of
production and the output of goods and services.
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4.
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The production function describes the relationship of changes in output to
different amounts of a single input while other inputs are held constant.
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5.
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Fixed cost is the cost that a business incurs even if there are no employees and
no production takes place.
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6.
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The number of items sold multiplied by the average price of each item yields the
total revenue of a business.
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7.
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The Law of Supply states that suppliers will normally offer less for sale at
higher prices and more for sale at lower prices.
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8.
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An increase in the cost of inputs can cause the supply curve to shift to the
left.
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9.
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The introduction of technology usually has no effect on supply.
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10.
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Marginal analysis compares the additional benefits of an action to its
additional costs.
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11.
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A supply curve is a graph that shows the various quantities supplied at a single
market price.
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12.
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When more suppliers enter the market, the market supply will typically
decline.
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13.
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The Law of Variable Proportions states that in the short run, output will
not change as one production input is varied while the others remain constant.
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14.
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An increase in output as each new input is added, as in the addition of a
worker, describes Stage I of the stages of production.
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15.
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The market supply curve shows the quantities offered at various prices by all
firms that offer the product for sale in a given market.
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16.
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The supply curve is likely to be elastic for products that can be made quickly
without huge amounts of capital and skilled labor.
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17.
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The mix of variable costs and fixed costs that a business faces affects the way
the business operates.
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18.
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Marginal cost is the change in total revenue when one more unit of output is
sold.
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19.
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The four important measures of cost are: total cost, fixed cost, variable cost,
and marginal cost.
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20.
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The profit-maximizing quantity of output occurs when marginal cost is exactly
equal to total revenue.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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21.
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All of the following can change the market supply curve EXCEPT
a. | the cost of labor. | b. | the expectation that prices are about to
increase. | c. | a change in the demand for the product. | d. | the numbers of
sellers offering the product. |
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22.
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The supply of a product normally decreases if
a. | the cost of inputs goes down. | c. | the price of the product
increases. | b. | more producers enter the market. | d. | taxes on the product
increase. |
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23.
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Total cost is the sum of the
a. | fixed costs and overhead. | c. | fixed and variable
costs. | b. | all variable costs. | d. | fixed and marginal costs. |
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24.
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The level of profit-maximizing output is reached when marginal cost is
a. | double marginal revenue. | c. | less than marginal
revenue. | b. | one-half of marginal revenue. | d. | equal to marginal
revenue. |
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25.
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When producers offer fewer products for sale at each and every price,
a. | the supply curve has shifted to the right. | b. | the supply curve has
shifted to the left. | c. | the price per unit
decreases. | d. | they expect subsidies. |
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26.
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Rent payments and property taxes would be counted as
a. | total cost. | c. | fixed costs. | b. | variable costs. | d. | marginal costs. |
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27.
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Many businesses are engaging in e-commerce because
a. | subsidies are available to many e-commerce businesses. | b. | fixed costs are
minimal. | c. | operating costs never increase. | d. | variable costs can be almost
eliminated. |
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28.
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When employees are getting in each other's way, the firm is
operating
a. | in Stage I of production. | c. | in Stage III of
production. | b. | in Stage II of production. | d. | as much as it possibly can. |
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29.
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The theory of production deals with the relationship between the factors of
production and
a. | the cost of raw materials. | c. | fixed costs. | b. | the cost of marginal
returns. | d. | the output of
goods and services. |
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30.
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Profits will be maximized when marginal revenue
a. | is double marginal cost. | c. | is one-half marginal
cost. | b. | equals marginal cost. | d. | exceeds marginal cost. |
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Completion
Complete each
sentence or statement.
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31.
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The three stages of production are: increasing returns, ____________________
returns, and negative returns.
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32.
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A production function describes the relationship between changes in output to
different amounts of a single input while other inputs are held ____________________.
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Matching
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Match each statement with the correct item below. a. | amount of a product that producers bring to market at any given
price | b. | total product a firm must sell to cover its total costs | c. | government payment
to encourage or protect an economic activity | d. | period of production that's long enough
for adjustments in all resources | e. | amount of a product that would be offered for
sale at all possible prices | f. | unprocessed natural products used in
production | g. | cost a business incurs even if nothing is produced | h. | graph showing the
various quantities supplied at each and every price | i. | number of units sold multiplied by the average
price per unit | j. | cost that changes when the rate of operation or output
changes |
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33.
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supply
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34.
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fixed cost
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35.
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supply curve
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36.
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variable cost
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37.
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total revenue
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38.
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quantity supplied
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39.
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raw materials
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40.
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break-even point
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41.
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subsidy
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Match each statement with the correct item below. a. | situation in which suppliers offer different amounts of products for sale at all
possible prices | b. | principle that states that in the short run, output will change if only one input is
varied | c. | total output produced by a firm | d. | principle that suppliers will normally offer
more for sale at high prices and less at lower prices | e. | extra cost incurred when a business produces
one additional unit of a product | f. | graph that shows the quantities of a product
offered at various prices by all firms that offer the product | g. | period of production
that is too short for any adjustments in production except changes in labor | h. | sum of the fixed and
variable costs | i. | measure of the way in which quantity supplied responds to changes in
price | j. | total fixed cost |
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42.
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Law of Supply
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43.
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overhead
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44.
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total cost
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45.
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supply elasticity
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46.
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marginal cost
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Short Answer
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47.
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Making Predictions A farmer purchases a new type of seed corn that will
reduce her need for pesticides by two-thirds. The new seed is only slightly more expensive than the
type she has planted in the past. What effect might this new technology have on her production?
Explain.
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48.
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Analyzing Information Jon opens a video rental store. What factors should
he consider in making his decision on what hours to operate each day? What hours would you recommend?
Why?
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49.
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Making Predictions The producer of a popular computer game believes that
a chief competitor will introduce a new, more appealing game within the next six months. What is
likely to happen to the price and popularity of the game? What might be an effective immediate
response to this expectation?
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50.
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Making Comparisons Martinique responds to a building boom and begins
manufacturing bricks. She starts by hiring employees. How will she know when she has enough
employees?
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Essay
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51.
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Determining Cause and Effect Name and explain two reasons why changes in
supply occur.
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52.
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Synthesizing Information Explain the three types of supply elasticity.
What is the main determinant of supply elasticity?
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