1. What effect does a rise in the cost of machinery or raw materials have on the cost of a good? A rise in the cost of raw materials (but not machinery) raises the cost. The good becomes cheaper to produce. The good becomes more expensive to produce. It does not have any effect on the cost of the good. 2. What does new technology generally do to production? It lowers cost and decreases supply. It lowers cost and increases supply. It increases cost and decreases supply. It has very little effect on production. 3. Why does the United States regulate automobile manufacturing in so many ways? to protect the consumer from Japanese and European automobiles to keep the price of U.S. automobiles competitive with others to keep the manufacturers of U.S. automobiles from gaining too much of the market to offset the air pollution caused by automobiles 4. When any effort by government causes the supply of a good to rise, what happens to the supply curve for that good? It shifts to the left. It shifts to the right. It reverses direction. The supply curve is not affected. 5. How do future expectations about the price of a good affect the present supply? If the price is expected to increase, many producers will hold onto their supply. If the price is expected to decrease, many producers will hold onto their supply. If the price of a related good is expected to increase, only a few sellers will hold onto their supply until the increase occurs. If the price is expected to increase and then decrease, most sellers will hold onto their supply until the decrease has occurred. 6. If prices rise and income stays the same, what is the effect on demand? More is bought of some goods and less of others. Fewer goods are bought. More goods are bought. Demand stays the same. 7. How can the demand for one good be affected by increased demand for another one? When goods are bought together, increased demand for one will decrease demand for the other. If goods are used together, increased demand for one will increase demand for the other. If goods are substitutes for each other, increased demand for one will increase demand for the other. A drop in price for a good will increase demand for the good and its substitute. 8. How does the price range affect the elasticity of demand for a product? Demand for all goods is elastic if the price is low enough. Demand for a good can be elastic at a low price but inelastic at a high price. Demand for a good can be inelastic at a low price, but elastic at a high price. Price range has little or no effect on elasticity of demand for a good. 9. What is the principle of the law of supply? The lower the price, the larger the quantity produced. The higher the price, the larger the quantity produced. The higher the price, the smaller the quantity produced. The lower the price, the more manufacturers will produce the good. 10. How is the total cost of a factory or other production site determined? marginal cost plus fixed cost fixed cost plus variable cost marginal cost plus variable cost marginal cost plus output cost