$$\text{Market Supply} = \text{Survey Supply} \times \frac{\text{Total Market Size}}{\text{Survey Size}}$$

Question 1

Based on Mojo Asian's individual supply curve, what is the relationship between price and quantity supplied?

Accepted Answer

As price increases, quantity supplied increases.

Question 2

According to the Law of Supply, which equation best describes the decision rule for a competitive seller?

Accepted Answer

$$P \geq MC$$

Question 3

If Mojo Asian's marginal cost of producing the 175th Boba Tea is $$6, and the market price is 5$$, what should Mojo Asian do?

Accepted Answer

Produce fewer than 175 Boba Teas.

Question 4

Which of the following would cause a shift of the supply curve for Boba Tea, rather than a movement along the curve?

Accepted Answer

An increase in the cost of plastic cups.

Question 5

If the price of coffee (a substitute-in-production for Boba Tea) rises, what happens to the supply curve for Boba Tea?

Accepted Answer

The supply curve for Boba Tea shifts left.

Question 6

Which cost is irrelevant when deciding how many units to produce in the short run?

Accepted Answer

Fixed costs

Question 7

What is the market supply at a price of $6 if Mojo Asian supplies 175 Boba Teas and Boba 805 supplies 150?

Accepted Answer

$$325$$

Question 8

Which principle states that a seller should supply one more unit if the marginal benefit is at least as large as the marginal cost?

Accepted Answer

Cost-Benefit Principle

Question 9

If a new oven allows Mojo Asian to bake more Boba Teas at once, what happens to the supply curve?

Accepted Answer

It shifts right (downward).

Question 10

Which of the following best explains why the supply curve is upward sloping?

Accepted Answer

Increasing marginal costs due to diminishing marginal product and rising input costs.

Question 11

If the price of a complement-in-production (like Vegemite for beer) rises, what happens to the supply of beer?

Accepted Answer

Supply of beer increases.

Question 12

In the long run, which type of cost remains?

Accepted Answer

Only variable costs

Question 13

If the expected price of Boba Tea next year is higher, what happens to the current supply curve?

Accepted Answer

It shifts left.

Question 14

Which equation represents the market supply when scaling up survey responses?

Accepted Answer

$$	ext{Market Supply} = 	ext{Survey Supply} 	imes \frac{	ext{Total Market Size}}{	ext{Survey Size}}$$

Question 15

If the number of sellers in the market increases, what happens to the market supply curve?

Accepted Answer

It shifts right.

Question 16

If the price of butter (an input for cookies) increases, what happens to the supply curve for cookies?

Accepted Answer

Supply curve shifts left.

Question 17

Which of the following is an example of an extensive margin response?

Accepted Answer

A new seller enters the market when price rises.

Question 18

If variable costs exceed revenue in the short run, what should a firm do?

Accepted Answer

Shut down production.

Question 19

Which of the following would NOT shift the supply curve for Boba Tea?

Accepted Answer

A change in the price of Boba Tea.

Question 20

If Mojo Asian can sell Boba Tea at any quantity but must accept the market price, what market structure is this?

Accepted Answer

Perfect competition

Supply in Competitive Markets: Individual and Market Supply, Marginal Costs, and Supply Shifts

Study Guide - Practice Questions