Question

1. The law of supply states, other things remaining the same, and firms produce  

A) More good, when the price is high

B) Less good, when the price is high

C) Less of a good as the required resources become scarcer  

D) Less quantity as the marginal cost of producing a good or service increase

  

2. All economic questions are about

A) how to make money.

B) what to produce.

C) how to cope with scarcity.

D) how to satisfy all our wants.

3. Positive economic statements

A) prescribe what should be.

B) are related only to microeconomics.

C) can be tested against the facts.

D) cannot be tested against the facts.

Answer 1

1. A) More good, when the price is high

The law of supply states that other things remaining constant, higher the price, the greater the quantity supplied and vice versa. It is natural that when price increases, producers will like to multiply their profit. So they produce more and the supply increases.

2. C) How to cope with scarcity

Scarcity arises because human wants are unlimited but resources to satisfy wants are limited. All basic economic questions (what to produce, how to produce and for whom to produce) are about limited resources (scarcity).

3. C) Can be tested against the facts.

Positive economic statements are based on facts and can be empirically verified. (They are not suggestive in nature)