Q: Which equation represents the Rational Rule for Sellers in a perfectly competitive market?

$$ \text{Price} = \text{Marginal Cost} $$

Question 1

Which of the following best describes the Law of Supply?

Accepted Answer

As the price rises, the quantity supplied rises.

Question 2

Suppose the market price of gasoline increases from $1.20 to $1.60 per litre. According to the supply curve, what is the most likely result?

Accepted Answer

The quantity of gasoline supplied will increase.

Question 3

Which of the following is NOT a factor that shifts the supply curve?

Accepted Answer

A change in the price of the good itself.

Question 4

A bakery adopts a new oven that allows it to bake bread more efficiently. What is the likely effect on the bakery's supply curve for bread?

Accepted Answer

The supply curve will shift to the right.

Question 5

If the price of wheat (an input for bread) increases, what happens to the supply of bread, ceteris paribus?

Accepted Answer

The supply curve for bread shifts to the left.

Question 6

Which equation represents the Rational Rule for Sellers in a perfectly competitive market?

Accepted Answer

$$ 	ext{Price} = 	ext{Marginal Cost} $$

Question 7

A farmer can grow either corn or wheat. If the price of corn rises, what is the likely effect on the supply of wheat?

Accepted Answer

The supply of wheat will decrease.

Question 8

Which of the following best explains why the individual supply curve is upward-sloping?

Accepted Answer

Rising marginal costs due to diminishing marginal product.

Question 9

Suppose there are 100 identical gas stations, each with the same supply curve. If one station supplies $q$ litres at price $p$, what is the total market supply at price $p$?

Accepted Answer

$$ 100 	imes q $$

Question 10

Which of the following is an example of a movement along the supply curve, rather than a shift of the supply curve?

Accepted Answer

A change in the price of the good itself.

Question 11

If the price of a substitute-in-production increases, what happens to the supply of the original good?

Accepted Answer

The supply of the original good decreases.

Question 12

A refinery faces rising costs for overtime labor and chemical additives as it increases gasoline production. What economic concept does this illustrate?

Accepted Answer

Rising marginal cost due to diminishing marginal product.

Question 13

Which of the following would cause a rightward shift in the market supply curve for smartphones?

Accepted Answer

A technological innovation that reduces production costs.

Question 14

If the number of sellers in a market increases, what happens to the market supply curve?

Accepted Answer

It shifts to the right.

Question 15

Which of the following best describes the relationship between the supply curve and the marginal cost curve for a competitive firm?

Accepted Answer

The supply curve is the same as the marginal cost curve above the shutdown point.

Question 16

A seller expects the price of their product to rise next year. What is the likely effect on current supply?

Accepted Answer

Current supply will decrease as the seller stores the product for future sale.

Question 17

Which of the following is the correct formula for marginal cost ($MC$)?

Accepted Answer

$$ MC = \frac{\Delta TC}{\Delta Q} $$

Question 18

Which of the following is an example of a fixed cost for a refinery?

Accepted Answer

The cost of the refinery building.

Question 19

Suppose a new environmental regulation increases the cost of a key input for all firms in an industry. What is the likely effect on the market supply curve?

Accepted Answer

The market supply curve shifts to the left.

Supply and Producer Choice: Microeconomics Study Notes (Chapter 3)

Study Guide - Practice Questions

Study Guide - Flashcards