Deck 4: Supply

Question 1

Apple outsources the production of iPads to Foxconn, a contract manufacturer with plants in China and Vietnam. Wages in China are higher than in Vietnam. The variable costs of manufacturing iPads in China would be ________ than Vietnam.

A) Lower.
B) Higher.
C) Not enough information to answer.

Answer 1

B

Question 2

Jupiter Power manufactures steel at an average cost of $150 per ton. Is the marginal cost of production lower or higher than $150?

A) Lower.
B) Higher.
C) Not enough information to answer.

Answer 2

C

Question 3

Which of the following contribute to the variable cost of generating electricity from solar panels?
(i) Sunshine.
(ii) Price of coal.
(iii) Purchase cost of solar panels.
(iv) Maintenance expenses of panels.

A) (i).
B) (ii).
C) (iii).
D) (iv).
E) (i) and (iv).

Answer 3

C

Question 4

During the Covid-19 pandemic, the government temporarily restricted dining in restaurants. What should the owner of a restaurant consider in deciding whether to close the business?

A) Fixed cost.
B) Variable cost.
C) Marginal cost.
D) All of the above.

Question 5

Luna Gas produces 20 million Btu (British thermal unit) of natural gas a day, at marginal cost of $2 per million Btu. The market price is $3.50 per million Btu. Explain how the company can increase its profit.

A) Reduce production.
B) Increase production.
C) Not enough information to answer.

Question 6

In August 2021, food delivery services in Spain were dominated by UberEats and Glovo. Deliveroo was reported to be deciding whether to exit the market. What should Deliveroo consider in the decision.

A) Revenue.
B) Fixed cost.
C) Variable cost.
D) All of the above.

Question 7

How would a lower price of cotton affect the supply of clothing?

A) Reduce.
B) Increase.
C) Not enough information to answer.

Question 8

Why must warehouses raise wages to attract more workers?

A) At the prevailing wage, some people choose not to work.
B) Every person compares the wages to their cost of working.
C) At the current wage, all who want to work are already doing so.
D) All of the above.
E) Not of the above.

Question 9

Explain why the supply of housing would be more elastic in the long run.

A) More real estate developers would enter the market.
B) It takes time to build new housing.
C) Land is scarce.
D) a and b.
E) b and c.

Question 10

Suppose that price elasticity of the long-run supply of restaurant meals is 2.5. If the price of meals increases by 5%, how would that affect the supply?

A) Increase by 12.5%.
B) Decrease by 12.5%.
C) Increase by 2.5%.
D) Decrease by 2.5%.

Question 11

Apple outsources the production of iPads to Foxconn, a contract manufacturer with plants in China and Vietnam. Wages in China are higher than in Vietnam. Compare the fixed and variable costs of manufacturing iPads in China relative to Vietnam.

Question 12

Jupiter Power manufactures steel at an average cost of $150 per ton. What is the marginal cost of production?

Question 13

Which of the following contribute to the variable cost of generating electricity from solar panels? (a) Sunshine. (b) Price of coal. (c) Purchase cost of solar panels. (d) Maintenance expenses.

Question 14

During the Covid-19 pandemic, the government temporarily restricted dining in restaurants. How should the owner of a restaurant decide whether to close the business?

Question 15

Luna Gas produces 20 million Btu (British thermal unit) of natural gas a day, at marginal cost of $2 per million Btu. The market price is $3.50 per million Btu. Explain how the company can increase its profit.

Question 16

In August 2021, food delivery services in Spain were dominated by UberEats and Glovo. Deliveroo was reported to be deciding whether to exit the market. Explain how Deliveroo should consider the fixed costs of operations in the decision.

Question 17

How would (a) a lower price of cotton, and (b) higher wages affect the supply of clothing?

Question 18

Warehouses complain that they must raise wages to attract more workers. Should they complain?

Question 19

Explain why the supply of housing would be more elastic in the long run.

Question 20

Suppose that price elasticity of the long-run supply of restaurant meals is 2.5. If the price of meals increases by 5%, how would that affect the supply?