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1) Which of the following is the best example of the law of supply? a
1) Which of the following is the best example of the law of supply?
a. A food producer increases the number of acres of wheat he grows to supply a milling company.
b. A milling company builds a new factory to process flour to export.
c. A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
d. A catering company buys a new dishwasher to make their work easier.
2. Which of the following is an example of a good with an inelastic supply?
a. apples
b. toothbrushes
c. hats
d. beanbags
3. Which of the following receives government subsidies that are in place to protect the population rather than for economic reasons?
a. national airlines in Western Europe
b. small farmers in France
c. a national car company in Indonesia
d. tobacco growers in the United States
4. When the selling price of a good goes up, what is the relationship to the quantity supplied?
a. The profit made on each item goes down.
b. It becomes practical to produce more goods.
c. There is no relationship between the two.
d. The cost of production goes down.
5. What factor has the greatest influence on elasticity and inelasticity of supply?
a. labor
b. time
c. financing
d. profit
Expert Solution
Answer 1: (Option-c)
A sandwich shop increases the number of sandwiches they supply every day when the price is increased.
Law of supply states that as the price of good increases the quantity supplied by the producer also increases.
In other words, there is a positive relationship between the quantity supplied and the price of a good.
Answer 2: (Option a). apples
Apples have inelastic supply as there is a fixed amount of land with the farmers to grow apples.
With the fixed amount of land, the production of apples is also limited.
Rest all of the goods- toothbrush, bean bags, and hats have elastic supply as they can be produced by the supplier in any quantity at a given point of time with the availability of machines and labor.
Answer 3: (Option b) small farmers in France
The small farmers receive subsidies so that they can avail the input at fewer prices for the production of crops.
As production of crops increases, a sufficient amount of food becomes available in the market which is good for the welfare of the whole population of a country.
Answer 4: (Option- b) It becomes practical to produce more goods
When the selling price of good increases it becomes profitable for the seller to produce and sell goods.
As the price increases, it means that the producer is able to generate more revenue by selling the goods and thus able to generate more profit.
Answer 5: (Option - b) Time
Time is one such important factor that has a great influence on the elasticity of the supply. The supply is less elastic in the short run as the firms are not able to change factors of production or streamline the production process which leads to a limited amount of production. However, in the long run, firms are not constrained by any factors of production and are better able to control the supply chain through proper management of resources.
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