Which of the following describes the relationship of price and quantity supplied based on the law of supply?
a. Firms are willing to produce a greater quantity of a good when the price of the good is higher.
b. Firms' production levels are not correlated with the price of a good.
c. The supply curve slopes downward.
d. As price increases, producers have more market power than consumers.
Answer: a. Firms are willing to produce a greater quantity of a good when the price of the good is higher.
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Purchasing power parity is defined as
A) an equal value of money across currencies. B) a currency whose value rises. C) an equal value of interest rates across currencies. D) a currency whose value falls. E) a constant value for a currency.
Assume the Keynesian transmission mechanism is operational and the economy is currently operating in the horizontal portion of the AS curve. If the money supply increases and the demand for money curve is downward sloping and investment is interest ____________, then Real GDP will ___________________
A) sensitive; rise B) insensitive; remain unchanged C) sensitive; remain unchanged D) insensitive; rise E) a and b