Download Economics Homework 5 - White Plains Public Schools

Homework #5
Name: _____________________________
Economics/E. Napp
Date: _____________________________
This Week’s Glossary:
1- The Law of Supply
 The law of supply is the tendency of suppliers to offer more of a good at higher
prices.
 Conversely, suppliers will offer less of a good at lower prices.
 A supply schedule is a chart that lists how much of a good or service a supplier will
offer at different prices.
2- Subsidy
 A subsidy is a government payment that supports a business or market.
 Subsidies are designed to protect domestic industries; to protect young and growing
businesses; and to protect domestic industries in case imports are ever cut off.
 Subsidies shift the supply curve to the right.
3- Excise Tax
 An excise tax is a tax on the production or sale of a good or service.
 A government can reduce the supply of a good by placing an excise tax on it.
 Generally, excise taxes are placed on harmful items such as cigarettes.
 Excise taxes shift the supply curve to the left. They reduce supply.
Multiple-Choice Questions:
1. What is the tendency of suppliers to offer
more of a good at a higher price?
(1) quantity supplied
(2) supply
(3) law of supply
(4) Elasticity of supply
2. What factor might lead to the opening of
several new pizzerias in a town?
(1) The price of a slice of pizza has gone up.
(2) The price of a slice of pizza has gone
down.
(3) The supply of pizza is inelastic.
(4) The cost of producing pizza has doubled.
3. The measure of the way quantity supplied
reacts to a change in price is
(1) Quantity supplied.
(2) Supply.
(3) Consumer demand.
(4) Elasticity of supply.
4. A raise in the price of a product
(1) Causes firms to decrease production.
(2) Causes a decrease in supply.
(3) Increases competition.
(4) Decreases competition.
5. Any factor that can change is
(1) Supply.
(2) A variable.
(3) A supply curve.
(4) A supply schedule.
6. A cost that rises or falls depending on
how much is produced is a(n)
(1) Fixed cost.
(2) Variable cost.
(3) Operating cost.
(4) Labor cost
7. A cost that does not change, no matter
how much of a good is produced is a(n)
(1) Fixed cost.
(2) Variable cost.
(3) Operating cost.
(4) Marginal cost.
8. How does a firm calculate its profit?
(1) Marginal revenue minus marginal cost
(2) Total revenue minus total cost
(3) Variable cost plus total cost
(4) Total revenue minus marginal revenue
9. The cost of producing one more unit of a
good is known as a(n)
(1) Fixed cost.
(2) Variable cost.
(3) Operating cost.
(4) Marginal cost.
10. 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?
(1) $835
(2) $435
(3) $400
(4) $35
11. A government payment that supports a
business or market is
(1) Quantity supplied.
(2) A regulation.
(3) An excise tax.
(4) A subsidy.
12. A tax on the production or sale of a good
is called
(1) Income tax.
(2) A revenue tax.
(3) An excise tax.
(4) A subsidy.
13. What happens to supply when input
costs go up?
(1) It decreases because the good becomes
more expensive to produce.
(2) It increases because the good becomes
cheaper to produce.
(3) It increases because the good becomes
more expensive to produce.
(4) It decreases because consumers find a
substitute product.
14. Government intervention in a market
that affects the production of a good is
(1) Regulation.
(2) An excise tax.
(3) Quantity supplied.
(4) An input cost.
15. Which of the following will always cause
a supply curve to shift to the left?
(1) advances in technology
(2) future expectations of falling prices
(3) excise taxes
(4) fewer inputs
A quote to consider:
“What most of these doomsday scenarios
have gotten wrong is the fundamental idea
of economics: people respond to incentives.
If the price of a good goes up, people
demand less of it, the companies that make
it figure out how to make more of it, and
everyone tries to figure out how to produce
substitutes for it. Add to that the march of
technological innovation (like the green
revolution, birth control, etc.). The end
result: markets figure out how to deal with
problems of supply and demand.”
~ Steven D. Levitt
Questions:
1- What is the law of supply?
2- Why do rising prices encourage competition?
3- How do government subsidies affect supply?
4- How do excise taxes impact supply?
5- What is the difference between a fixed cost and a variable cost?
6- What is a marginal cost?
7- Why do governments sometimes regulate markets?
Analyzing Cartoons:
1- Explain the economic meaning of the following cartoon.
2- Explain the economic meaning of the following cartoon.