Explain why there is a direct relationship between price and quantity supplied
What will be an ideal response?
For firms to produce more of a good per time period they have to purchase more materials, hire more labor, and purchase other inputs used to make the good. To get the producer to pay these higher costs it is necessary to increase the price the seller receives for each unit sold. Firms will also increase quantity supplied if the price of that good increases, allowing the firm to gain additional profits. The profits are incentives for the supplier to produce more.
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If a 10 percent increase in price leads to a 20 percent increase in the quantity supplied, then the elasticity of supply is 0.5
a. True b. False Indicate whether the statement is true or false
The cost disease of the service sector is evidenced by
a. a failure of the market mechanism. b. increased quality of public and private services. c. dramatic increases in municipal budget burdens for education, health care, and police and fire protection. d. the increased productivity in the services area.
When barriers to entry are high, a monopolist (or cartel) will often be able to increase their profits by
a. expanding their output so they can increase their price. b. reducing their output so they can raise their price. c. expanding their output so they can lower their price. d. reducing their output so they can lower their price.
The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement
a. causes demand for LGBP Clothing to be less elastic. b. is more effective than other forms of advertisement because of its content. c. will cause the market to be more competitive. d. Both a and b are correct.