Chapter 4 - Supply

Question 1

Supply

Answer 1

Supply is the amount of goods or services that firms are willing and able to provide at any particular price at a given time, ceteris paribus

Question 2

Law of supply

Answer 2

Law of supply states that if there is an increase in the price of a good, there will be an increase in the quantity supplied of the good, ceteris paribus

Question 3

Law of diminishing marginal returns (DMR)

Answer 3

Describes how output is affected when a firm uses more variable inputs while maintaining at least one factor of production fixed in the short run. DMR states that by employing additional variable factors of production, the marginal returns will eventually decline in the long run.

Question 4

Marginal cost

Answer 4

The cost of producing an additional unit of output

Question 5

Non-price determinants of supply

Answer 5

Costs of factors of production, Indirect taxes, Subsidies, Technological changes, Expectations of future prices, prices of Related products, Number of firms in the industry (use acronym CISTERN)

Question 6

Competitive supply

Answer 6

The output of one product prevents/limit the production of alternative products, due to competing resources

Question 7

Joint supply

Answer 7

The supply of a product results in the output of at least one by-product

Question 8

Indirect taxes

Answer 8

Government levies (tax) on expenditure (goods or services)