Question 1

To calculate the price elasticity of supply, we divide
A) the percentage change in price by the percentage change in quantity supplied.
B) the percentage change in quantity supplied by the percentage change in price.
C) rise by the run.
D) the average price by the average quantity supplied.

Accepted Answer

Price elasticity of supply is defined as the percentage change in the quantity supplied divided by the percentage change in price. Therefore, we need to divide the percentage change in quantity supplied by the percentage change in price to calculate the price elasticity of supply. Choice A is the formula for calculating price elasticity of demand. Choice C is the formula for calculating the slope of a line. Choice D is not a relevant formula for calculating price elasticity of supply.

Question 2

Which of the following is a key determinant of the price elasticity of supply?
A) the slope of the supply curve
B) the availability of substitutes in production
C) the available technology
D) the time it takes to change output in response to a change in price

Accepted Answer

The time it takes to change output in response to a change in price is a key determinant of the price elasticity of supply. If it takes a long time to increase or decrease production in response to a change in price, the supply is considered relatively inelastic. On the other hand, if producers can quickly adjust their output in response to price changes, then the supply is considered relatively elastic.

Question 3

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, S_A and S_B. As price rises from P₀ to P₁, which supply curve is more elastic? A) S_A B) S_B C) They are equally inelastic. D) They are equally elastic.

Accepted Answer

The answer of Figure 6-12 
-Refer to Figure 6-12. The...

Question 4

The price elasticity of supply measures
A) the responsiveness of quantity supplied to changes in input prices.
B) the responsiveness of quantity supplied to changes in technology.
C) the responsiveness of quantity supplied to changes in price.
D) a supplier's ability to produce a good in the face of scarcity.

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to changes in price.

Question 5

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity of lobster supplied, then the supply of lobster is
A) unit elastic.
B) unitarily elastic.
C) elastic.
D) perfectly inelastic.

Accepted Answer

If a small decrease in price leads to a large decrease in quantity supplied, then supply is elastic. In this case, an 8 percent decrease in price leads to a 15 percent decrease in quantity supplied, indicating that the supply of lobster is elastic.

Question 6

If a supply curve is a horizontal line, supply is said to be
A) perfectly inelastic.
B) unit elastic.
C) inelastic.
D) perfectly elastic.

Accepted Answer

A horizontal supply curve indicates that the quantity supplied remains the same regardless of changes in price. This means that supply is perfectly elastic.

Question 7

If the quantity of walkie-talkies supplied increases by 5 percent when price increases by 12 percent, then
A) the supply of walkie-talkies is inelastic.
B) the supply of walkie-talkies is elastic.
C) the walkie-talkie supply curve will shift to the right.
D) the walkie-talkie supply curve will shift to the left.

Accepted Answer

The answer of If the quantity of walkie-talkies supplied increases...

Question 8

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?
A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price increase.
C) The increase in price is not affected by the elasticity of the supply curve.
D) There will be no increase in price if the supply curve is perfectly inelastic.

Accepted Answer

If the demand for a product increases, the price will increase. The extent of the price increase depends on the elasticity of the supply curve. A more elastic supply curve means there is more flexibility in the quantity supplied as price increases, so the price increase will be smaller. Conversely, a less elastic supply curve means there is less flexibility in the quantity supplied as price increases, so the price increase will be greater. If the supply curve is perfectly inelastic, there will be no increase in quantity supplied as price increases, so there will be no increase in price.

Question 9

Suppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as they desire. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?
A) Supply is unit-elastic.
B) Supply is perfectly elastic.
C) Supply is perfectly inelastic.
D) Supply is relatively inelastic.

Accepted Answer

The answer of Suppose at the going wage rate of...

Question 10

Table 6-8
  The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-8 above shows the demand and supply schedules for basketball games tickets.
-Refer to Table 6-8. What is the numerical value of the price elasticity of supply?
A) 1
B) greater than 0 but less than 1
C) 0
D) greater than 1

Accepted Answer

The answer of Table 6-8
  The town of Bloomfield...

Question 11

Suppose the supply of bicycles is price elastic. This means that
A) consumers will respond significantly to an increase in the quantity of bicycles supplied.
B) suppliers will increase the quantity of bicycles supplied, but not immediately.
C) suppliers face many substitutes for bicycles.
D) suppliers will respond significantly to changes in the price of bicycles.

Accepted Answer

The answer of Suppose the supply of bicycles is price...

Question 12

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil. What does this indicate about the long-run price elasticity of supply for oil?
A) The elasticity coefficient is likely to be higher in the long run than in the short run.
B) The elasticity coefficient is likely to be lower in the long run than in the short run.
C) The elasticity coefficient approaches 0 in the long run as supplies are depleted.
D) The elasticity coefficient is unstable in the long run because oil supplies may be depleted.

Accepted Answer

Over time, firms have more flexibility to adjust their production levels, invest in new technology and exploration, and adapt their supply chains to changes in oil prices. This suggests that the long-run price elasticity of supply for oil is likely higher than in the short run, as firms have more time to respond to changing market conditions.

Question 13

Figure 6-12 -Refer to Figure 6-12. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run? A) S_B represents supply in the short run and S_A represents supply in the long run. B) Either S_A or S_B could represent supply in the short run; in the long run the supply curve must be a vertical line. C) Either S_A or S_B could represent supply in the long run; in the short run the supply curve must be a horizontal line. D) S_A represents supply in the short run and S_B represents supply in the long run.

Accepted Answer

In the short run, supply is fixed and cannot be increased, so the supply curve is vertical. In the long run, supply can be increased, so the supply curve is upward sloping.

Question 14

Inelastic supply occurs whenever the elasticity of supply value is
A) negative and < -1.
B) any positive number.
C) positive and > 1.
D) positive and < 1.

Accepted Answer

Inelastic supply occurs when the elasticity of supply value is positive and less than 1. This means that when there is a change in price, the quantity supplied will not change proportionally by the same amount. In other words, the percent change in quantity supplied is smaller than the percent change in price.

Question 15

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements accurately predicts the resulting decrease in price?
A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price decrease.
C) The increase in price is not affected by the elasticity of the supply curve.
D) The decrease in price will always be proportional to the magnitude of the demand shift.

Accepted Answer

When demand for a product decreases, the price of the product will decrease as well. The elasticity of the supply curve determines how much the price will decrease. If the supply curve is more elastic, then a decrease in demand will result in a smaller decrease in price. This is because suppliers are able to adjust their production levels more easily in response to changes in demand, which prevents the price from dropping too much. Therefore, choice B is correct.

Question 16

The price elasticity of supply of hot dog buns is estimated to be 1.5. Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by
A) 1.5 percent.
B) 15 percent.
C) approximately 25 percent.
D) approximately 5 percent.

Accepted Answer

A price elasticity of supply of 1.5 means that the quantity supplied will change by 1.5 percent for every 1 percent change in the price. Therefore, a 10 percent decrease in price will cause the quantity supplied to decrease by 1.5 x 10 = 15 percent.

Question 17

A supply curve that is vertical
A) is perfectly elastic.
B) is perfectly inelastic.
C) is impossible.
D) has an elasticity equal to 1.

Accepted Answer

A vertical supply curve indicates that quantity supplied is completely unresponsive to changes in price, meaning that even a large change in price will have little to no effect on the quantity supplied. This is the definition of perfectly inelastic supply.

Question 18

Table 6-8
  The town of Bloomfield is well known for its basketball team. The price of basketball game tickets is determined by market forces. Table 6-8 above shows the demand and supply schedules for basketball games tickets.
-Refer to Table 6-8. What is the most distinctive feature of the supply curve?
A) The supply curve is perfectly inelastic.
B) The supply curve is horizontal.
C) The supply curve is upward sloping.
D) The supply curve is perfectly elastic.

Accepted Answer

The answer of Table 6-8
  The town of Bloomfield...

Question 19

Suppose when the price of jean-jackets increased by 10 percent, the quantity supplied increased by 16 percent. Based on this information the price elasticity of supply of jean-jackets is
A) 0.625.
B) 6%.
C) 1.6.
D) 1.6%.

Accepted Answer

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Using the given information, we get: 
Price elasticity of supply = (16%)/(10%) = 1.6. Therefore, the best choice is C).

Question 20

The price elasticity of supply is usually a positive number because
A) quantity supplied increases in response to income increases.
B) quantity supplied increases in response to price increases.
C) the quantity demanded usually rises when price falls and therefore suppliers would want to capitalize on this increase in demand.
D) price rises when supply increases.

Accepted Answer

Price elasticity of supply measures the responsiveness of quantity supplied to a change in price. A positive price elasticity of supply indicates that quantity supplied increases in response to price increases, as suppliers are willing to produce and supply more goods at higher prices, leading to a higher elasticity. Option A refers to income elasticity of supply, which measures the responsiveness of quantity supplied to a change in income. Options C and D are incorrect statements.

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

To calculate the price elasticity of supply, we divide

Which of the following is a key determinant of the price elasticity of supply?

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, SA and SB. As price rises from P0 to P1, which supply curve is more elastic?

The price elasticity of supply measures

If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity of lobster supplied, then the supply of lobster is

If a supply curve is a horizontal line, supply is said to be

If the quantity of walkie-talkies supplied increases by 5 percent when price increases by 12 percent, then

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product increases. Which of the following statements accurately predicts the resulting increase in price?

Suppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as they desire. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?

Suppose the supply of bicycles is price elastic. This means that

Over longer periods of time, increases in oil prices provide firms with incentives to explore and recover oil. What does this indicate about the long-run price elasticity of supply for oil?

Figure 6-12 -Refer to Figure 6-12. Suppose the diagram shows the supply curves for a product in the short run and in the long run. Which supply curve represents supply in the short run and which curve represents supply in the long run?

Inelastic supply occurs whenever the elasticity of supply value is

Suppose the demand curve for a product is represented by a typical downward-sloping curve. Now suppose the demand for this product decreases. Which of the following statements accurately predicts the resulting decrease in price?

The price elasticity of supply of hot dog buns is estimated to be 1.5. Holding everything else constant, this means that a 10 percent decrease in the price of hot dog buns will cause the quantity of hot dog buns supplied to decrease by

A supply curve that is vertical

Suppose when the price of jean-jackets increased by 10 percent, the quantity supplied increased by 16 percent. Based on this information the price elasticity of supply of jean-jackets is

The price elasticity of supply is usually a positive number because

Figure 6-12 -Refer to Figure 6-12. The diagram shows two supply curves, S_A and S_B. As price rises from P₀ to P₁, which supply curve is more elastic?