Supply Review Economics Mr. Bordelon

Key Terms An expense that costs the same whether or not a firm is producing a good or service.

Key Terms An expense that costs the same whether or not a firm is producing a good or service. Fixed cost

Key Terms The income that the supplier receives from selling one more unit.

Key Terms The income that the supplier receives from selling one more unit. Marginal revenue

Key Terms A tax on the sale or manufacture of a good.

Key Terms A tax on the sale or manufacture of a good. Excise tax

Key Terms A measure of how suppliers will respond to a change in price.

Key Terms A measure of how suppliers will respond to a change in price. Elasticity of supply

Key Terms A government payment to support a business or market.

Key Terms A government payment to support a business or market. Subsidy

Key Terms The tendency of suppliers to offer more of a good at a higher price.

Key Terms The tendency of suppliers to offer more of a good at a higher price. Law of supply

Key Terms The additional cost of producing one more unit of output.

Key Terms The additional cost of producing one more unit of output. Marginal cost

Key Terms Supply schedule Regulation Variable costs

Main Ideas How does the marginal product of labor change as more people are hired?

Main Ideas How does the marginal product of labor change as more people are hired? Marginal product of labor increases up to a certain point. Once that point is reached, however, total output still increases, but at a decreasing rate. Diminishing returns.

Main Idea What categories of costs combine to create a firm’s total cost?

Main Idea What categories of costs combine to create a firm’s total cost? Fixed costs and variable costs combine to create total cost. Fixed costs are costs that are the same no matter how much is produced. Variable costs rise or fall depending on the quantity produced.

Main Ideas Name and describe three factors that can cause a change in supply.

Main Ideas Name and describe three factors that can cause a change in supply. Changes in input costs Future expectations Technological changes Government subsidies, taxes, and regulations Imports and exports

Main Idea What circumstances cause a firm to experience diminishing marginal returns?

Main Idea What circumstances cause a firm to experience diminishing marginal returns? Diminishing marginal returns occur when output declines with each additional unit of labor. They generally result when the supply of capital does not increase with the work force, such as when there are not enough machines or tools or supplies for added workers to use.

Main Ideas How can the global economy affect the supply of a good in the United States?

Main Ideas How can the global economy affect the supply of a good in the United States? Increases in wages, technological innovation, or trade restrictions will affect supply of goods to the United States.

Main Ideas To maximize costs, marginal revenue should be equal to ______.

Main Ideas To maximize costs, marginal revenue should be equal to marginal cost.

Critical Thinking Assume that a $1 per pound tax has been placed on fish. What effect will this have on the supply curve for fish?

Critical Thinking Assume that a $1 per pound tax has been placed on fish. What effect will this have on the supply curve for fish? Supply curve will move to the left.

Critical Thinking The local coffee shop on 17-92 has the following expenses per month: $5,000 rent $3,000 manager $4,000 part-time workers $2,000 supplies In July, the owner can expect to earn $7,000. If the store closes down, he won’t have to pay for part-time workers or supplies. Should he close the shop down?

Critical Thinking Should he close the shop down? No. Total revenue ($7,000) is greater than the cost of keeping the shop open ($6,000).

Compare What is the difference between increasing marginal returns and diminishing marginal returns?

Compare What is the difference between increasing marginal returns and diminishing marginal returns? Increasing marginal returns occur when there is an investment in the business, and the marginal product of labor increases as the number of workers increases. Diminishing marginal returns occur when there is an investment in the business, and the marginal product of labor decreases as the number of workers increases.

Problem Solving You open a t-shirt factory. What are your fixed costs? What are your variable costs? How would each of these costs affect the number of t- shirts you make?