Question

Which of the following would be expected to cause a decrease in the quantity supplied of a certain good? 6. a. b. c. d. A decrease in the cost of materials used in producing that good An increase in the cost of materials used in producing that good A decrease in the price of the good An increase in the price of the good Suppose that at a price of $70 the quantity supplied in a market is 10 units, and at a price of $80 the quantity supplied in the market is 15 unit. If we use this information to create a linear supply equation, what will that equation be? 7. b. P 50+ 2Qs C P-90-2Q 8. Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that: a. The law of demand is invalid Despite the increase in price, enrollment increased due to some other factor(s) changing in the market b. c. The demand for a college education is positively sloped d. Everything you have ever believed in has been a lie Price Quantity Demanded Quantity Supplied $5 $4 $3 $2 $1 Per Month 500 700 850 1000 1200 Per Month 1200 1000 850 700 500 Consider the table above. If the price in the market is initially set at $2, what is the result in the market, and what will eventually have to happen to move the market to equilibrium? 9. a. b. c. d. Shortage, price increase Shortage, price decrease Surplus, price increase Surplus, price decrease 10. Suppose a market is initially in equilibrium. Then a change occurs and the equilibrium price What change occurred in the market to decreases while the equilibrium quantity increases. cause these changes to price and quantity? a. b. c. d. Decrease in demand Increase in demand Decrease in supply Increase in supply 11. Suppose the market for a good is initially in equilibrium, and then a shock occurs which causes the demand to increase. Which of the following responses do we expect in the market? a. b. c. d. A movement to the left along the supply curve A movement to the right along the supply curve The supply curve will shift left The supply curve will shift right

Answer 1

6. Answer is (b).

An increase in the cost of materials used in producing that good.

Explanation: Increase in cost of material means increase in variable cost which increases as quantity supplied increases. If prices of the goods is sticky then with the original price, it becomes less profitable for the company to keep supplying the same quantity. So quantity supplied decreases.

On the other hand, increase in prices cause decrease in quantity demanded and not quantity supplied.