Economics Supply Fundamentals Quiz: Chapter 5 Section 1

1. What is a supply curve?

A chart displaying the production possibilities frontier for a company.

A graph showing the demand for a product at various prices.

A visual representation of the consumer surplus in a market.

A graph showing the various quantities supplied at each and every price that might prevail in the market

A supply curve specifically represents the relationship between the price of a good and the quantity of that good producers are willing to supply. It is not to be confused with the demand curve, production possibilities frontier, or consumer surplus.

Explanation

A supply curve specifically represents the relationship between the price of a good and the quantity of that good producers are willing to supply. It is not to be confused with the demand curve, production possibilities frontier, or consumer surplus.

2. What is the shape of the supply curve in economics?

Vertical

Upward sloping

Downward sloping

Horizontal

The correct answer is 'upward sloping' because in economics, a supply curve typically slopes upwards, indicating that as the price of a good or service increases, producers are willing to supply more of that product.

Explanation

The correct answer is 'upward sloping' because in economics, a supply curve typically slopes upwards, indicating that as the price of a good or service increases, producers are willing to supply more of that product.

3. What is supply?

The amount of a product that could be bought at all possible prices that could prevail in the market

The quantity of a product available for sale in the market.

The demand for a product in the market.

The price at which a product is sold in the market.

Supply refers to the amount of a product that is available for purchase at various market prices, not the demand for the product, the quantity available for sale, or the selling price.

Explanation

Supply refers to the amount of a product that is available for purchase at various market prices, not the demand for the product, the quantity available for sale, or the selling price.

4. What does supply elasticity measure?

A measure of the demand for a product at different prices.

A measure of how much consumers are willing to pay for a product.

Measure of the way in which quantity supplied responds to a change in price

A measure of the total quantity of a product that can be produced at a certain price point.

Supply elasticity specifically refers to how suppliers react to changes in price by adjusting the quantity of goods supplied.

Explanation

Supply elasticity specifically refers to how suppliers react to changes in price by adjusting the quantity of goods supplied.

5. What does 'quantity supplied' refer to in economics?

The total number of products available in the market.

The production costs incurred by producers to bring products to the market.

The amount of products consumers are willing to buy.

Amount that producers bring to the market at any given price

Quantity supplied specifically refers to the amount of a product that producers are willing to bring to the market at different price points. It is a key concept in understanding how supply and demand interact in the market.

Explanation

Quantity supplied specifically refers to the amount of a product that producers are willing to bring to the market at different price points. It is a key concept in understanding how supply and demand interact in the market.

6. According to the Law of Supply, which of the following statements is true?

The quantity supplied remains constant regardless of price.

The quantity supplied increases as the price decreases.

The quantity supplied vaires directly with its price

The quantity supplied has no correlation with price.

The Law of Supply states that as the price of a good or service increases, the quantity supplied by producers also increases. This direct relationship between price and quantity supplied is a fundamental principle in economics.

Explanation

The Law of Supply states that as the price of a good or service increases, the quantity supplied by producers also increases. This direct relationship between price and quantity supplied is a fundamental principle in economics.

7. Which product is likely to have the most elastic supply?

Diamonds

Gold bars

Original Picasso paintings

Ice cream cones

Elastic supply refers to the responsiveness of quantity supplied to changes in price. Products like ice cream cones are likely to have a more elastic supply as they can be produced quickly and easily in response to changes in demand. On the other hand, products like diamonds, gold bars, and original Picasso paintings have limited supply and are not easily produced, making their supply less elastic.

Explanation

Elastic supply refers to the responsiveness of quantity supplied to changes in price. Products like ice cream cones are likely to have a more elastic supply as they can be produced quickly and easily in response to changes in demand. On the other hand, products like diamonds, gold bars, and original Picasso paintings have limited supply and are not easily produced, making their supply less elastic.

8. How can increased government regulations affect the supply curve?

Shift to the right

Remain unchanged

Shift to the left

Become vertical

Increased government regulations can cause businesses to incur additional costs and restrictions, leading to a decrease in the overall supply of goods and services which shifts the supply curve to the left.

Explanation

Increased government regulations can cause businesses to incur additional costs and restrictions, leading to a decrease in the overall supply of goods and services which shifts the supply curve to the left.

9. What is your favorite color?

Yelleow

Green

Red

Blue

Favorite color is subjective and varies from person to person. In this case, the correct answer is 'Yellow'.

Explanation

Favorite color is subjective and varies from person to person. In this case, the correct answer is 'Yellow'.

10. Which of the following can cause an increase in supply?

An increase in demand

Government regulations

An increase in taxes

A decrease in production costs

An increase in taxes can cause an increase in supply as producers may produce more to cover the costs of the tax. A decrease in production costs, an increase in demand, and government regulations would typically not directly cause an increase in supply.

Explanation

An increase in taxes can cause an increase in supply as producers may produce more to cover the costs of the tax. A decrease in production costs, an increase in demand, and government regulations would typically not directly cause an increase in supply.