Supply practice questions.

Which of the following would cause the supply curve for coffee to shift to the right?

• A rise in the market price of coffee
• An increase in the wages of coffee plantation workers
• The development of a higher-yielding coffee plant variety
• The expectation that coffee prices will be higher next season

Answer: The development of a higher-yielding coffee plant variety

Improved technology lowers unit production costs, increasing supply at every price. A change in the good's own price causes a movement along the curve, higher wages shift supply left, and expected higher prices lead producers to withhold output now.

Beef and leather are both obtained from cattle. If demand for beef rises sharply, what is the most likely effect in the market for leather?

• The supply of leather decreases, raising its price
• The supply of leather increases, lowering its price
• The demand for leather decreases, lowering its price
• There is no effect, as the two markets are unrelated

Answer: The supply of leather increases, lowering its price

Beef and leather are in joint supply: producing more beef automatically yields more hides, so leather supply shifts right and its price tends to fall.

A farmer can use the same land to grow either barley or oats. Following a rise in the market price of barley, which outcome is most likely in the oats market?

• The supply of oats shifts to the left
• The supply of oats shifts to the right
• There is a movement down along the supply curve of oats
• The demand for oats shifts to the left

Answer: The supply of oats shifts to the left

Barley and oats are in competitive supply: when barley becomes more profitable, the farmer reallocates land away from oats, reducing the supply of oats at every price.

A government imposes a $2 per-unit indirect tax on producers of sugary drinks. In a supply and demand diagram this is best represented by

• a movement up along the original supply curve
• a downward vertical shift of the supply curve by $2
• a rightward shift of the demand curve
• an upward shift of the supply curve by $2

Answer: an upward shift of the supply curve by $2

A per-unit tax raises the cost of supplying each unit by the amount of the tax, so the supply curve shifts vertically upward by exactly $2 per unit.

Which of the following describes the effect of a per-unit production subsidy granted to manufacturers of solar panels?

• The supply curve shifts downward by the subsidy per unit
• The supply curve shifts to the left as firms' costs rise
• Quantity supplied falls at every price
• The demand curve shifts to the right because panels become cheaper

Answer: The supply curve shifts downward by the subsidy per unit

A subsidy lowers the effective cost of producing each unit, shifting supply to the right — vertically downward by the per-unit subsidy. Demand does not shift; buyers move along their demand curve as price falls.

The world price of copper falls. Ceteris paribus, in the market for copper this causes

• a leftward shift of the supply curve
• a movement down the supply curve
• a rightward shift of the supply curve
• an increase in supply at every price

Answer: a movement down the supply curve

A change in the good's own price never shifts its supply curve; it causes a movement along the curve — here downward, reducing quantity supplied.