Chapter 5, Section 1: Guided Reading

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Section 1: Guided Reading and Review

Understanding Supply

A. As You Read

As you read Section 1, supply the missing causes or effects on the lines provided in the chart.
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Cause Effect
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1. The price of pizza increases. 1. On pizzerias:

2. The cost of tomato sauce increases along with 2. On pizza supply schedule:
the price of pizza.

3.

3. On market supply curve: Prices will remain the
same as on a single pizzeria’s supply curve.

4.
4. On supply curve: The curve always rises from
left to right.

5. On the value of elasticity of supply:

5. The supply of a good is not very responsive to 6. On supply:
price changes.

6. A supplier, such as an orange grower, has a
long time to respond to a price change.

B. Reviewing Key Terms

Read the statements below. In the space provided, write T if the statement is true or F if it is false.

7. Price and quantity supplied are variables on a supply schedule.

8. A supply curve shows price and quantity in a table.

9. Elasticity of supply states that the output of a good increases as the price of the
good increases.

10. To create a market supply schedule, an economist needs to know the total output of
all suppliers in a given market.

Chapter 5 Section 1: Guided Reading and Review 13

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Section 2: Guided Reading and Review

Costs of Production

A. As You Read

As you read Section 2, supply the requested information in the spaces provided.
1. A basic question a producer must answer:

2. Marginal product of labor benefits gained from worker specialization:

3. Negative effect of a firm’s limited capital:

4. Curve pattern for marginal product of labor when capital is limited:
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5. Examples of typical fixed costs:
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6. Why labor is a variable cost:

7. How the marginal costs of production for the beanbag producer changed after the rate of
three bags per hour was surpassed:

8. How total revenue and total cost can help set the most profitable output level:

9. How marginal revenue and marginal cost can help set the most profitable output level:

10. Why a producer would continue to increase output even though the marginal cost of pro-
duction may be rising:

B. Reviewing Key Terms

Define the following terms.
11. marginal product of labor
12. diminishing marginal returns
13. total cost
14. marginal cost

Chapter 5 Section 2: Guided Reading and Review 15

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Section 3: Guided Reading and Review

Changes in Supply

A. As You Read

As you read Section 3, supply information to complete each statement in the spaces provided.
1. Unable to control price, a profitable producer faced with rising labor and/or materials costs will
.
2. New technology affects supply by
.
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3. European governments’ reasons for subsidizing food producers include
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.

4. In the past, Western European governments subsidized banks and airlines by

.

5. The United States government subsidizes such industries as

.

6. An excise tax increases production costs by

.

7. Consumers may be unaware of excise taxes because

.

8. Government regulations often reduce supply because

.

9. During periods of inflation, suppliers may temporarily withhold goods that can be stored
for long periods because

B. Reviewing Key Terms .
.
Complete each sentence by writing the correct key term in the blank provided.

10. Government can increase supply by granting producers a(n)

11. To reduce supply, a government might levy a(n) .

12. Requiring pollution control on automobiles exemplifies government
.

Chapter 5 Section 3: Guided Reading and Review 17

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Vocabulary Practice

1
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456 2 3
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9

11 12
13

14
15

Use the following clues to complete the crossword puzzle.

Across Down

1. Quantity of a good produced increases as the price 1. Output change from adding one more worker is the
rises, according to the . marginal product of .

2. Any expense that rises or falls is a variable . 2. The amount of money it takes to keep a factory
7. Government intervention that affects price, supply, open is the operating .

or quality is called . 3. Variable and fixed expenses make up the .
9. How suppliers respond to a price change is a mea- 4. The amount of a good offered at a specific price is

sure of the supply’s . the .
11. When price is not under company control, the mar- 5. The cost is the additional cost of producing

ket price equals the marginal . one more unit.
13. Government can provide support for a market in the 6. Costs that do not change are .
8. Government may tax the sale or manufacture of a
form of a(n) .
14. The relationship between price and quantity sup- good with a(n) .
10. A graph of the data points in a supply schedule cre-
plied is shown in a supply .
15. If adding workers increases total output at a ates a supply .
12. A factor that can change is a(n) .
decreasing rate, marginal returns are .

20 Chapter 5 Vocabulary Practice