Question

1. rachelle makes and sells silk scarves. each week, rachelle purchases $100 worth of different colored silk fabric. on one of her trips to buy her materials, the price of the silk fabric increases by 50%. how will this rise in the cost of silk affect rachelles overall supply? a there will be no change in supply b there will be a fall in supply c not enough information is given d there will be an increase in supply 2. externalities and free riders are both examples of ______. a public good b market failure c poverty threshold d government goals 3. where is the point where demand and supply come together? a price ceiling b marginal cost c price floor d equilibrium

Explanation:

1. When the cost of silk (an input for producing silk scarves) increases by 50%, it becomes more expensive for Rachelle to produce each scarf. As a result, she will be less willing and able to supply the same quantity of scarves at each price level. This leads to a fall in supply.
2. Externalities (both positive and negative) and free - riders (in the case of public goods) are situations where the market does not allocate resources efficiently. Market failure occurs when the market on its own does not produce an efficient allocation of resources.
3. The equilibrium point is defined as the point where the demand curve and the supply curve intersect. At this point, the quantity demanded is equal to the quantity supplied. A price ceiling is a legal maximum price, a price floor is a legal minimum price, and marginal cost is the cost of producing one additional unit.

Answer:

1. B. there will be a fall in supply
2. B. market failure
3. D. equilibrium