Question 1

If the price of a product or service rises, quantity supplied increases.

Accepted Answer

According to the law of supply, as the price increases, producers are willing to supply more of the product or service to the market, ceteris paribus. Therefore, quantity supplied increases.

Question 2

Ontario tobacco growers recently ripped out tobacco plants and replaced them with peanut vines. This illustrates the law of supply.

Accepted Answer

The law of supply states that producers will adjust their production levels and resource allocation in response to changes in market conditions, such as price changes or demand shifts. In this case, tobacco growers are responding to such changes by switching to peanut vines.

Question 3

Farm land around a city is often sold to developers to build houses. These sales are smart choices by land owners because housing prices are rising more rapidly than the prices of farm products.

Accepted Answer

This statement is true. The demand for housing is generally higher than the demand for farm products, which leads to a faster appreciation of housing prices. Therefore, selling farmland for development can be a smart financial choice for landowners.

Question 4

Haley works painting kitchens. In her free time, she paints watercolour paintings that sell for $1,000. If the price of her paintings rises to $1,200, it would be a smart choice for Haley to spend less time painting kitchens.

Accepted Answer

If the price of Haley's paintings rises to $1,200, she can make more money per painting by spending more time on her watercolour paintings and less time painting kitchens. Therefore, it would be a smart choice for her to allocate more time towards her higher paying activity.

Question 5

The law of supply says that when price rises, quantity supplied increases.

Accepted Answer

According to the law of supply, as the price of a good or service increases, suppliers will offer more of that good or service, ceteris paribus. This is because the higher price incentivizes suppliers to increase their production in order to earn a greater profit. Therefore, there is a direct relationship between price and quantity supplied.

Question 6

Rising prices increase quantity supplied because of higher profits and the need to cover increasing marginal opportunity costs.

Accepted Answer

When prices rise, producers/suppliers can earn higher profits and are therefore incentivized to increase production to capture these profits. Additionally, as production increases, marginal opportunity costs (the cost of producing one additional unit) also increase, which means suppliers need higher prices to cover those costs. These factors combine to lead to an increase in quantity supplied.

Question 7

The law of supply states that when price rises, supply increases.

Accepted Answer

The law of supply states that when price rises, supply increases, not the other way around.

Question 8

Heather earns $15 an hour as a server at the Snug Harbor Restaurant. If her manager offers her $20 an hour, it would be a smart decision to spend more time working.

Accepted Answer

Heather would be earning $5 more per hour at the Snug Harbor Restaurant, which would allow her to earn more money in less time. Therefore, it would be smart for her to spend more time working at the restaurant to take advantage of the higher hourly rate.

Question 9

When inputs are equally productive in all activities, marginal opportunity costs are constant.

Accepted Answer

When inputs are equally productive in all activities, the opportunity cost of producing one good in terms of the other is constant, as the same amount of resources can be used to produce either good without impacting the efficiency or productivity of the inputs. Therefore, marginal opportunity costs are constant.

Question 10

When increasing output, marginal opportunity costs increase because inputs are not equally productive in all activities.

Accepted Answer

As output increases, firms need to allocate their resources and inputs to produce more goods. However, not all inputs are equally productive in all activities. Therefore, as firms produce more output, they need to use less productive inputs, which leads to a higher opportunity cost of producing additional units of output. This is reflected in the increasing marginal opportunity cost of production.

Question 11

Haley works painting kitchens. In her free time, she paints watercolour paintings that sell for $1,000. If the price of her paintings falls to $800, it would be a smart choice for Haley to spend less time painting kitchens.

Accepted Answer

The decision for Haley to spend less time painting kitchens and more time on her watercolor paintings should be based on her comparative advantage and the opportunity cost of her time, not solely on the price drop of her paintings. If painting kitchens still offers a higher or comparable return for her time, it might not be a smart choice to shift her focus solely based on the price drop of her paintings.

Question 12

For a business to be willing to increase its quantity supplied, rising prices are necessary to cover higher marginal opportunity costs of production.

Accepted Answer

As the quantity supplied increases, the production costs increase as well, and thus the marginal opportunity costs of production also increase. In order for the business to cover these higher costs and maintain profitability, they may need to raise their prices. This is why rising prices can incentivize businesses to increase their quantity supplied.

Question 13

Farm land around a city is often sold to developers to build houses. These sales must not be smart choices by land owners because fertile land is not being used to grow crops.

Accepted Answer

Selling farmland for development can be a smart choice for landowners for various reasons, including financial gain, changing market demands, or personal reasons. The decision does not solely depend on the land's fertility but also on economic and personal factors.

Question 14

When decreasing output, marginal opportunity costs increase because inputs are not equally productive in all activities.

Accepted Answer

The answer of When decreasing output, marginal opportunity costs increase...

Question 15

If the price of a product or service rises, supply increases.

Accepted Answer

If the price of a product or service rises, the quantity supplied increases, but not necessarily the overall supply. The supply curve itself is determined by factors such as production costs, technology, and resource availability, which may not be affected by changes in price.

Question 16

Quantity supplied is the amount you actually plan to supply at a given price.

Accepted Answer

Quantity supplied refers to the actual amount a producer or supplier is willing to supply at a specific price, therefore the statement is true.

Question 17

The law of supply works because of the availability of substitutes.

Accepted Answer

The law of supply works based on the assumption that there are no perfect substitutes for the product being sold. This means that a supplier cannot easily switch to producing another product if the price of the original product they were selling decreases. Therefore, the law of supply is not dependent on the availability of substitutes.

Question 18

When inputs are not equally productive in all activities, marginal opportunity costs are constant.

Accepted Answer

If inputs are not equally productive in all activities, then the marginal opportunity costs will not be constant.

Question 19

The law of supply says that when price rises, supply decreases.

Accepted Answer

The law of supply states that when price rises, supply will increase, not decrease. When the price of a good or service increases, suppliers have an incentive to produce and supply more to the market in order to take advantage of the higher price and earn greater profits.

Question 20

The law of supply says that when price rises, quantity supplied decreases.

Accepted Answer

The law of supply states that when price rises, quantity supplied also increases. When price falls, quantity supplied decreases.

Quiz 3: Show Me the Money: the Law of Supply