Chapter 5 Economics Review

Why would the supply curve of a dog walking business be considered elastic?
because it can hire workers quickly if the price rises
What is a supply curve?
a graph of the quantity supplied of a good at different prices
What factor might lead to the opening of several new pizzerias in a town?
The price of a slice of pizza has gone up.
Any factor that can change is
a variable
The measure of the way quantity supplied reacts to a change in price is
elasticity of supply
A raise in the price of a product
increases competition
What is needed to create a supply schedule for a fruit smoothie shop?
the price charged and the number of smoothies supplied
What is the tendency of suppliers to offer more of a good at a higher price?
law of supply
If supply is elastic
reacts strongly to change in price
What is a market supply schedule?
a chart that lists how much of a good all suppliers will offer at different prices
The additional income from selling one more unit of a good, sometimes equal to price, is
marginal revenue.
If the fixed cost of producing video games is \$14, and the variable cost of producing seven video games is \$12, how much is the total cost of producing seven video games?
\$26
The cost of producing one more unit of a good is known as a(n)
marginal cost
Total cost is
fixed costs plus variable costs.
What is the level of output every firm strives for?
when marginal revenue equals marginal cost
How does a firm calculate its profit?
total revenue minus total cost
A cost that does not change, no matter how much of a good is produced is a(n)
fixed cost.
A cost that rises or falls depending on how much is produced is a(n)
variable cost.
If the total cost of producing 300 leather jackets is \$400 and the total cost of producing 301 leather jackets is \$435, what is the marginal cost of production at 300 leather jackets?
\$35
What does the beanbag factory experience when the number of workers is increased from 2 to 3?
increasing marginal returns
Why would a farmer store his or her soybeans for future sale instead of selling them right after harvest?
Inflation is running at 25 percent
If a firm’s product is perishable, where is the firm usually located?
near its consumers
Which of the following will always cause a supply curve to shift to the left?
excise taxes
Government intervention in a market that affects the production of a good is
regulation
Which of the following is a way entrepreneurs influence supply?
technology
What is a negative effect of the U.S. farm subsidies that pay farmers to take land out of cultivation?
Farmers use more pesticides on lands they do cultivate to make up for lost production.
cause input costs to drop.
increase supply at all price levels.
cause the supply curve to shift to the right.
What happens to supply when input costs go up?
It decreases because the good becomes more expensive to produce.
A government payment that supports a business or market is
a subsidy
A tax on the production or sale of a good is called
an excise tax.

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