Question 1

If the supply curve is upward sloping the price elasticity of supply must be:&#10;A) Positive&#10;B) Greater than one&#10;C) Less than one&#10;D) Negative

Accepted Answer

The price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good. If the supply curve is upward sloping, it means that as the price increases, the quantity supplied also increases, indicating a positive relationship between price and quantity supplied. Therefore, the price elasticity of supply must be positive.

Question 2

An increase in price will increase the quantity supplied if:&#10;A) The supply curve is upward sloping.&#10;B) The supply curve is downward sloping.&#10;C) The demand curve is upward sloping.&#10;D) The demand curve is downward sloping.

Accepted Answer

The supply curve is typically upward sloping, indicating that an increase in price leads to an increase in the quantity supplied, as suppliers are willing to produce and sell more at higher prices.

Question 3

A supply curve shows:&#10;A) How much people want to buy.&#10;B) How much firms would like to produce.&#10;C) How much firms would like to produce and are able to produce at one price.&#10;D) How much firms would like to produce and are able to produce at each and every price.

Accepted Answer

The supply curve represents how much of a good or service firms are willing and able to produce at each price level, illustrating the relationship between price and quantity supplied.

Question 4

The supply curve might shift outwards (i.e. have more supplied at each and every price) if:&#10;A) The price increases.&#10;B) The number of suppliers falls.&#10;C) The costs of production increase.&#10;D) Better methods of production are introduced.

Accepted Answer

The supply curve shifts outwards when it becomes easier or more cost-effective to produce goods, which can happen with the introduction of better methods of production. This makes it possible for suppliers to offer more at each price level.

Question 5

The supply curve might shift inwards with less supplied at each price if:&#10;A) There are less firms producing.&#10;B) There are lower production costs.&#10;C) The market price falls.&#10;D) There is an improvement in the level of technology in the industry.

Accepted Answer

A shift inwards (or to the left) of the supply curve indicates a decrease in the quantity supplied at each price. This can happen if there are fewer firms producing the good, as it would reduce the overall market supply. Lower production costs, a fall in market price, or an improvement in technology typically cause the supply curve to shift outwards (to the right), indicating an increase in quantity supplied at each price.

Question 6

If the quantity supplied increases 20% when the price increases 5% the price elasticity of supply is:&#10;A) + 4&#10;B) - 4&#10;C) + 0.25&#10;D) - 0.25

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price, which is (20%/5%) = 4, indicating option A is correct.

Question 7

If the price elasticity of supply is + 2 this means a 5% increase in price leads to 10% decrease in quantity supplied.

Accepted Answer

A price elasticity of supply of +2 means a 5% increase in price leads to a 10% increase in quantity supplied, not a decrease.

Question 8

If the price elasticity of supply is price inelastic then a given increase in price will lead to relatively bigger decrease in quantity supplied (in percentages).

Accepted Answer

If the price elasticity of supply is price inelastic, it means that a given increase in price will lead to a relatively smaller percentage change in quantity supplied, not a bigger decrease.

Question 9

If a 20% increase in price leads to a 2% increase in the quantity supplied then supply is price _________.

Accepted Answer

The answer of If a 20% increase in price leads...

Question 10

If price increases from 10 pence to 12 pence and the quantity supplied doubles, what is the price elasticity of supply?&#10;A) + 0.2&#10;B) + 5&#10;C) + 2.5&#10;D) - 2.5

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, the price increases from 10 to 12 pence, a 20% increase (2/10). If the quantity supplied doubles, that's a 100% increase. So, the elasticity is 100% / 20% = 5, which is option B.

Question 11

Which of the following would not influence supply within the market?&#10;A) The cost of raw materials&#10;B) The availability of resources&#10;C) Consumer income&#10;D) The prevailing wage rate.

Accepted Answer

The answer of Which of the following would not influence...

Question 12

A movement upwards along the supply curve is known as:&#10;A) An extension of supply&#10;B) A contraction of supply&#10;C) A fall in supply&#10;D) None of the above

Accepted Answer

The answer of A movement upwards along the supply curve...

Question 13

Which of the following would not cause the supply curve to shift to the right?&#10;A) An increase in the number of producers&#10;B) An increase in the national minimum wage (NMW)&#10;C) A technological innovation&#10;D) An increase in subsidies

Accepted Answer

The answer of Which of the following would not cause...

Question 14

Which of the following would cause the supply curve for wheat to shift to the left?&#10;A) Increased subsidies to wheat farmers&#10;B) A fall in the price of wheat&#10;C) Poor weather conditions&#10;D) A fall in the cost of fertiliser

Accepted Answer

The answer of Which of the following would cause the...

Question 15

An increase in the number of producers within an industry will cause:&#10;A) A movement upwards along the supply curve.&#10;B) The supply curve to shift to the right.&#10;C) A movement downwards along the supply curve.&#10;D) The supply curve to shift to the left.

Accepted Answer

The answer of An increase in the number of producers...

Deck 6: Supply