Suppliers will supply more of a good when the price of that good rises because the opportunity cost of not producing that good has risen.
Answer the following statement true (T) or false (F)
True
The law of supply depends upon opportunity cost. Higher prices mean higher profits. The opportunity cost of not producing that good (for instance, producing another good. has risen by the amount of the increased expected profits. Suppliers will switch production to capture those higher profits.
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Suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. In all other respects, the two types of houses are identical. Houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. Sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. If some of the owners of houses with solid foundations remove their houses from the market because they can't sell their house for a price that is as high as the value of their house, then:
A. the average sales price of a house will rise. B. buyers' reservation prices will rise. C. the owners of houses with a cracked foundation will also take their houses off the market. D. the proportion of homes for sale with a cracked foundation will rise.
For typical goods, supply curves are
A. horizontal. B. upward sloping. C. downward sloping. D. vertical.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point E to Point A, the opportunity cost of hybrid cars, measured in terms of motorcycles
A. increases. B. initially increases, then decreases. C. decreases. D. remains constant.
If a monopolistically competitive firm is producing where MR = MC and price is greater than ATC, the firm is earning a profit.
Answer the following statement true (T) or false (F)