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1 Section 1 Word list a. Ability & willingness b. Chart form c. Decrease d. Demand e. Graph form f. Increase g. Less h. More i. Price j. Price k. Purchase a product l. Quantity supplied m. Responsiveness n. Supply o. Supply p. Supply curve q. Supply schedule Page When economists consider demand, they are interested in people s willingness & ability to over a wide range of prices 2. When economists consider supply, they are concerned with people s to offer products for sale over a wide range of prices 3. How does supply differ from demand? QC p 105 a. Supply: b. Demand: 4. Why does the supply curve slope upward & to the right? 5. How does the price of a product affect the quantity offered for sale? Cap The is a listing that shows the quantity supplied at each & every price. Figure The shows the same information in the form of a graph as the supply schedule. 8. When the supply curve is upward sloping, will be supplied at lower prices & at higher prices. 9. How does the Law of Supply differ from the Law of Demand 10. In our modified market economy, the federal government guarantees most workers a minimum wage of $7.75 per hour. What is the minimum wage in California? Page What is the Law of supply? 12. What will happen to the supply curve for CDs in the following situations? Where does it shift to? Why? L2 a. Cost of materials used to make CDs falls. b. New training methods improve worker efficiency c. Innovative process for pressing CDs introduced d. Leading CD producer goes out of business 13. Why are sellers likely to supply more goods when prices are high? QC Why does new technology shift the supply curve to the right? 15. A change in means that producers are willing to offer a different quantity for sale at each & every price. Cap An in supply occurs when the supply curve shifts to the right 17. A in supply occurs when the supply curve shifts to the left. 18. How does a change in supply differ from a change in quantity supplied? a. Change in quantity supplied b. Change in supply Page The elasticity of supply, like the elasticity of demand, is a measure of. Cap The key to elasticity is the way the dependent variable ( ) changes in response to a change in the independent variable ( ) 1

2 21. What determines whether a business s supply curve is elastic or inelastic? Page If quantities are being purchased, the concept is elasticity. TXT If quantities are being brought to market for sale, the concept is elasticity 24. Elasticity for both supply & demand is a measure of responsiveness to a change in. 25. What is the difference between the supply schedule & the supply curve? Review 109 a. Supply schedule provides information on supply in form b. Supply curve offers same information in form 26. What is the difference between a change in quantity supplied & a change in supply? a. Change in quantity supplied = b. Change in supply: 27. What are the 7 factors that can cause an increase or decrease in supply? g. 28. According to the Law of Supply, how does price affect the quantity offered for sale? a. Sellers will offer more at higher prices & less at lower prices 29. What is meant by supply? (pages )Review page What is the difference between the supply schedule & the supply curve? a. Supply schedule b. Supply curve What is meant by a change in quantity supplied? a. The change in the 32. What are the 7 factors that cause a change in supply? g.. Section 2 1. $264, Assembly line 3. Decreasing 4. Equal 5. II 6. Increase 7. Maximized 8. Negative 9. Repeated 10. Variable Proportions Page Cartoon: On what is the theory of production based? Cap 111 Page Declining output has nothing to do with the abilities of workers, because the Law of Variable Proportions assumes that all units of variable input are of quality. VI The Law of shows how total output will change when all inputs except one are fixed. Cap 4. How are the three stages of production related to the Law of Variable Proportions? Cap What does a production function show? QC What point must eventually be reached if companies continue adding workers? 7. Henry Ford developed the in the early 1900s. He found that productivity increased dramatically if each worker the same task attaching the gas tank, for example over and over. By 1922, the company earned a day. 2

3 8. What economic law does the production function illustrate? 9. What is marginal product? Page If company officials double the number of workers in small factories, what could happen? Page How is marginal product related to total product & how is it measured? 12. How does marginal product change in each of the stages of production a. Stage I b. Stage II c. Stage III 13. You need to hire workers for a project you are directing. You may add one worker at a time in a manner that will allow you to measure the added contribution of each worker. At what point will you stop hiring workers? Critical Thinking Review a. Somewhere in Stage b. In Stage I, as each worker is added, total product & marginal product. c. State II, as each worker is added, marginal product is positive but. d. At the end of Stage II, total product is e. Stage III as each worker is added, total product decreases because marginal product is 14. Productivity the output per unit of one of the factors of production is measured in different ways. The productivity of labor, for example, is gauged by output per hour worked. Because a higher rate of output per hour worked will lead to increased profits, businesses are constantly seeking ways to boost labor productivity. a. List 10 methods that could be used to increase labor productivity. i ii iv.. v.. v vi vii ix.. x.. Section 2 (pages ) 15. Define the Law of Variable Proportions 16. What is the difference between total product & marginal product a. Total product: b. Marginal product: 17. What are the three stages of production? Section 3 a. Product b. Cost c. Revenue d. Fixed & variable e. Extra f. Fixed g. Variable h. Total i. Marginal j. Number of units sold k. Average price l. Production m. Sale n. Inverse o. Total p. Marginal q. Revenue r. Cost s. Variable costs t. Profit-maximizing u. Motive v. Equal to w. Quantity x. Supply y. Change z. One aa. Fixed costs bb. Small cc. Revenue dd. Output ee. Variable input ff. Production gg. Marginal revenue hh. Maximize profits 3

4 Page Why is it necessary for businesses to consider productivity as well as cost? Page What 5 items do fixed costs generally include? Cap Marginal is used to define the three stages of production cap Marginal & marginal are used to determine the profitmaximizing quantity of output. 5. How do total costs differ from marginal costs? a. Total cost is the sum of costs. b. Marginal cost is the cost incurred by producing one additional unit of product 6. How do businesses calculate total costs? 7. What are the four measures of cost that businesses must consider? a. cost b. cost c. cost d. cost 8. What is a common way industries increase supply? CD 119 Page Why are the extra costs of operating a gas station 24 hours a day minimal? 10. How does marginal revenue differ from total revenue? b. Total revenue is the multiplied by per unit. c. Marginal revenue is extra revenue associated with the & of one additional unit of output. Page What is the relationship between productivity & cost a. Increases or decreases in productivity generally will have an effect on cost 12. What are two key measures of revenue a. revenue b. revenue 13. What is the use of marginal analysis for break-even & profit-maximizing decisions? a. By comparing the marginal & the marginal of adding units of variable input, break-even & profit-maximizing points can be established 14. Many oil-processing plants operate 24 hours a day, using several shifts of workers to maintain operations. How do you think a plant s fixed & variable costs affect its decision to operate around the clock? a. When are small relative to fixed costs, the additional cost of operating around the clock is. 15. If total profits are the same after the sixth worker is hired as after the seventh worker is hired, why should the company hire the 7 th worker? a. Because with 6 workers the quantity of output had not been reached b. This occurs with the hiring of the 7 th worker c. Other combinations may generate the same amount of profits, but none are more profitable. Page 123 IE 16. What drives suppliers to produce more? a. Profit 17. What is the profit-maximizing quantity of output? a. Where the marginal cost of producing the last unit of output is to the marginal revenue it receives from the sale of that unit 18. What is movement along the supply curve called? a. Change in supplied 19. What is movement of the supply curve called? 4

5 a. Change in 20. What are some things that cause a change in supply? List 7 g.. Section 3 (pages ) 21. What is the relationship between marginal cost & total cost? a. Marginal cost is the in total cost incurred by producing additional unit of a product 22. What are four measures of cost? Critical Thinking 23. Why would companies with very large fixed costs & small variable costs be most likely to operate or stay open for extended periods? a. will be incurred whether the company is operating or not. Because variable costs are, increased costs of operating for extended periods will be minimal & may be covered by extra generated during extended operation. 24. Why might production functions tend to differ from one firm to another? a. The production function depends upon the way changes when differing amounts of are added. Because different firms have different technologies & use different amounts of variable inputs, the function for each firm will vary. Compare an automobile factory, with hundreds of workers with a real estate office, which may employ a few Bonus Question 25. Which measure of revenue is the most useful for business decisions? a. ; By comparing marginal revenues & marginal costs, businesses are able to determine how many workers & what level of output are needed to. 5

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