1.

Which of the following statements about supply is TRUE?

Question 1 options:

The "law of supply" states that as price rises, supply increases.

If the marginal cost of production is always equal to $5 per unit, then the supply curve is horizontal.

Both the first and second answers are true.

Neither the first or second answers is true.

2.

An increase in the marginal cost of producing a good is, graphically, represented by:

Question 2 options:

A leftward shift in the supply curve.

A movement down and to the left along a supply curve.

A rightward shift in the supply curve.

A movement up and to the right along a supply curve.

3.

When deciding how much of a particular good to produce, a producer should:

Question 3 options:

Keep producing more as long as the price is at least as great as marginal cost.

Produce an extra unit of output if it generates positive producer surplus.

Follow both the rules proposed in the first and second answer choices.

Follow neither rule proposed in the first or second answer choices.