Supply - AP Microeconomics

1. What effect does a subsidy have on supply?

   Increases supply. Government payment reduces production costs for suppliers.

2. Identify a non-price determinant of supply.

   Number of sellers. Market structure affects total production capacity available.

3. What is producer surplus?

   Difference between what producers are willing to accept and what they receive. Area above supply curve and below market price.

4. What is the impact of expectations of future price rise on current supply?

   Current supply decreases. Producers withhold current supply hoping for higher future profits.

5. What is the supply curve's typical slope?

   Upward sloping. Reflects the positive relationship between price and quantity supplied.

6. What is the main determinant of elasticity of supply?

   Time period for adjustment. Longer adjustment periods allow greater supply response.

7. State the formula for supply function.

   $Q_s = f(P)$ where $P$ is price and $Q_s$ is quantity supplied. Basic functional notation showing supply as dependent on price.

8. Which curve is affected by a change in production technology?

   Supply curve. Technology improvements shift the entire supply relationship.

9. Identify the effect of price ceilings on supply.

   Can lead to shortages. Maximum prices below equilibrium discourage production.

10. What is the law of supply?

    As price increases, quantity supplied increases; vice versa. This describes the fundamental positive relationship in supply theory.

11. How does supply respond to price in perfectly elastic supply?

    Infinite response to price change. Any price change causes infinite quantity adjustment.

12. Which term describes a movement along the supply curve?

    Change in quantity supplied. Movement along curve due to price changes only.

13. Name a factor that causes a change in quantity supplied.

    Change in price. Price is the only factor causing movement along the curve.

14. How does an increase in input prices affect supply?

    Decreases supply. Higher input costs reduce profitability and discourage production.

15. What is the result of improved production efficiency?

    Increased supply. Better efficiency reduces costs and increases output capacity.

16. What does a leftward shift in the supply curve signify?

    A decrease in supply. Leftward movement means less quantity supplied at each price level.

17. What happens to supply if production costs decrease?

    Supply increases. Lower costs make production more profitable, encouraging higher output.

18. Identify one result of government-imposed price floors.

    Surplus in the market. Minimum prices above equilibrium create excess supply.

19. Identify the relationship between price and quantity supplied.

    Direct relationship. Higher prices motivate greater production quantities.

20. What results from an increase in the number of producers?

    Increase in supply. More market participants expand total productive capacity.

21. What is the effect of natural disasters on supply?

    Decreases supply. External shocks disrupt production capacity and costs.

22. What does a perfectly elastic supply curve look like?

    Horizontal line. Infinite elasticity appears as a flat horizontal line.

23. What is the effect of technological advancement on supply?

    Increases supply. Innovation reduces costs and improves production efficiency.

24. What is the impact of tariffs on supply?

    Decreases supply. Import taxes increase costs for foreign suppliers.

25. Define market supply.

    Sum of all individual supplies in a market. Horizontal addition of all individual firm supply curves.

26. Identify a factor that shifts the supply curve.

    Production technology. Better technology reduces costs and increases productive capacity.

27. State the effect of a tax on supply.

    Decreases supply. Taxes increase production costs, reducing supply incentives.

28. What is the effect of increased government regulation on supply?

    Decreases supply. Compliance costs and restrictions reduce production efficiency.

29. Which curve is affected by changes in input prices?

    Supply curve. Input costs directly affect production profitability decisions.

30. Which factor does NOT shift the supply curve?

    Change in consumer preferences. Consumer preferences affect demand, not supply decisions.

31. What does a rightward shift in the supply curve indicate?

    An increase in supply. Rightward movement means more quantity supplied at each price level.

32. What happens to supply if more firms exit the market?

    Supply decreases. Fewer producers means reduced total market capacity.

33. What does perfectly inelastic supply mean?

    Quantity supplied does not change with price. Supply remains constant regardless of price changes.

34. Define elasticity of supply.

    Measure of how much quantity supplied responds to price change. Responsiveness coefficient calculated as percentage changes ratio.

35. What does a vertical supply curve represent?

    Perfectly inelastic supply. Fixed quantity regardless of price level changes.

36. How do expectations of future lower prices affect current supply?

    Current supply increases. Producers rush to sell before prices drop further.

37. What happens to supply if a new firm enters the market?

    Supply increases. More producers means greater total market capacity.

38. What does unitary elastic supply imply?

    Percentage change in quantity supplied equals percentage change in price. Elasticity coefficient equals one in this balanced case.

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