How Well Do You Know The Law Of Supply?

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Questions: 10 | Attempts: 89 | Updated: Nov 16, 2023

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How Well Do You Know The Law Of Supply? - Quiz

Do you understand the law of supply well? With this law of supply quiz, you can see how updated your knowledge is. The law of supply is about the fundamental principle of economic theory. It states there is a direct relationship between price and quantity. If you know all this and more about supply and its law, you can easily ace this quiz. You must give this quiz a try to test as well as enhance your knowledge. All the best!

Questions and Answers

1.

How is supply defined?
- A.
  
  The willingness and ability of the government to offer protections to citizens
- B.
  
  The willingness and ability of consumers to purchase goods and services
- C.
  
  The willingness and ability of laborers to work for producers for pay
- D.
  
  The willingness and ability of producers to offer goods and services for sale
Correct Answer
D. The willingness and ability of producers to offer goods and services for sale

Explanation
Supply is defined as the willingness and ability of producers to offer goods and services for sale. This means that producers are able to provide goods and services to the market, and they are willing to do so in exchange for payment. Supply is an important concept in economics as it helps determine the quantity of goods and services that are available in the market.

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2.

When supply goes down, what happens to a supply curve?
- A.
  
  Moves right
- B.
  
  Moves left
- C.
  
  Moves up
- D.
  
  Moves down
Correct Answer
B. Moves left

Explanation
When supply goes down, it means that there is a decrease in the quantity of a good or service available in the market. This leads to a shift of the supply curve to the left. A leftward shift indicates that at any given price level, the quantity supplied is lower than before. This could be due to factors such as a decrease in production or an increase in production costs, resulting in a decrease in supply.

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3.

Which of the following can cause an increase in supply?
- A.
  
  Fewer sellers in the marketplace
- B.
  
  A decrease in the cost of inputs
- C.
  
  A decrease in productivity
- D.
  
  An increase in taxes
Correct Answer
B. A decrease in the cost of inputs

Explanation
A decrease in the cost of inputs can cause an increase in supply because it reduces the production costs for sellers. When the cost of inputs decreases, sellers can produce goods or services at a lower cost, which allows them to offer more products in the marketplace. This increase in supply can lead to lower prices and more availability of the goods or services, ultimately benefiting consumers.

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4.

With an increase in government regulation, the supply curve can
- A.
  
  Shift to the right
- B.
  
  Increase
- C.
  
  Decrease
- D.
  
  Shift to the left
Correct Answer
D. Shift to the left

Explanation
An increase in government regulation can lead to a decrease in the supply curve. This is because government regulations often impose restrictions or requirements on businesses, which can increase their costs of production. As a result, businesses may be less willing or able to supply the same quantity of goods or services at each price level, causing the supply curve to shift to the left.

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5.

What is the sum of fixed and variable costs?
- A.
  
  Total costs
- B.
  
  Fixed costs
- C.
  
  Variable costs
- D.
  
  Marginal costs
Correct Answer
A. Total costs

Explanation
The sum of fixed and variable costs is referred to as total costs. Fixed costs are expenses that do not change regardless of the level of production or sales, such as rent or salaries. Variable costs, on the other hand, fluctuate with the level of production or sales, like raw materials or direct labor. Total costs encompass both fixed and variable costs and provide a comprehensive understanding of the overall expenses incurred by a business. Marginal costs, although related to variable costs, represent the additional cost of producing one more unit of a product or service.

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6.

Production costs that do not change as the level of output changes
- A.
  
  Marginal costs
- B.
  
  Variable costs
- C.
  
  Fixed costs
- D.
  
  Total costs
Correct Answer
C. Fixed costs

Explanation
Fixed costs are production costs that do not change regardless of the level of output. These costs remain constant over a given period of time, such as rent, salaries, insurance, and depreciation. They are not affected by variations in production or sales volume. Fixed costs are essential for a business to operate, as they must be paid regardless of the level of activity. By understanding fixed costs, businesses can better plan and budget their expenses.

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7.

This determinant of supply includes both labors as well as raw material. Which of the following statements is true: when the price of it decreases, the supply increases .
- A.
  
  Prices of Resources
- B.
  
  Government Tools
- C.
  
  Competition
- D.
  
  Technology
Correct Answer
A. Prices of Resources

Explanation
When the price of resources, which include both labor and raw materials, decreases, it becomes cheaper for businesses to produce goods and services. As a result, businesses are more willing and able to supply a larger quantity of goods and services at a given price. This leads to an increase in supply. Conversely, if the price of resources increases, it becomes more expensive for businesses to produce, resulting in a decrease in supply. Therefore, the statement "when the price of resources decreases, the supply increases" is true.

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8.

What does the 'Law of Supply' state?
- A.
  
  As prices decrease, supply increases.
- B.
  
  As price increases, quantity demanded decreases.
- C.
  
  As price increases, supply increases.
- D.
  
  As price decreases, quantity demanded decreases.
Correct Answer
C. As price increases, supply increases.

Explanation
The Law of Supply states that as the price of a good or service increases, the quantity supplied by producers also increases. This is because higher prices incentivize producers to supply more of the good or service in order to maximize their profits. Conversely, if the price decreases, the quantity supplied will also decrease as producers have less incentive to supply the good or service at lower prices.

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9.

Supply means a seller is _____________ and _____________ to sell a good.
- A.
  
  Willing and happy
- B.
  
  Willing and hopeful
- C.
  
  Willing and satisfied
- D.
  
  Willing and able
Correct Answer
D. Willing and able

Explanation
The correct answer is "willing and able". In the context of supply, being "willing" means that the seller is ready and inclined to sell a good. Being "able" means that the seller has the necessary resources, capabilities, and capacity to produce and deliver the good. Both of these qualities are essential for a seller to effectively supply a good in the market.

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10.

What does the vertical axis shows on the market demand and supply graph?
- A.
  
  Prices
- B.
  
  Quantity
- C.
  
  Demand
- D.
  
  Equilibrium
Correct Answer
A. Prices

Explanation
The vertical axis on the market demand and supply graph represents prices. This axis shows the different price levels at which goods or services are being offered in the market. It helps in understanding the relationship between price and quantity demanded or supplied. By analyzing the graph, one can determine the equilibrium price, where the quantity demanded equals the quantity supplied.

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Current Version
Nov 16, 2023

Quiz Edited by
ProProfs Editorial Team
Nov 10, 2022

Quiz Created by
Sophia Smith

How well do you know The Law Of Supply?

How is supply defined?

When supply goes down, what happens to a supply curve?

Which of the following can cause an increase in supply?

With an increase in government regulation, the supply curve can

What is the sum of fixed and variable costs?

Production costs that do not change as the level of output changes

This determinant of supply includes both labors as well as raw material. Which of the following statements is true: when the price of it decreases, the supply increases .

What does the 'Law of Supply' state?

Supply means a seller is _ and _ to sell a good.

What does the vertical axis shows on the market demand and supply graph?