Question 1

If the elasticity of supply is zero,what do we know

Accepted Answer

If the elasticity of supply is zero, it means that the quantity supplied is the same regardless of the price. This is because the suppliers are not willing or able to increase the quantity supplied in response to a change in price. The supply curve would be vertical in this case, indicating that there is no change in the quantity supplied even if the price changes.

Question 2

Suppose that an increase in the price of carrots from $1.50 to $1.70 per kilogram raises the amount of carrots that carrot farmers produce from 1.2 million kilograms to 1.6 million kilograms.Using the midpoint method,what would be the elasticity of supply

Accepted Answer

The elasticity of supply is calculated using the midpoint method: [(Q2 - Q1) / ((Q2 + Q1) / 2)] / [(P2 - P1) / ((P2 + P1) / 2)]. Substituting the given values: [(1.6 - 1.2) / (1.6 + 1.2) / 2] / [(1.7 - 1.5) / (1.7 + 1.5) / 2] = 0.2857 / 0.1176 = 2.28.

Question 3

What happens if sellers respond substantially to changes in price

Accepted Answer

If sellers respond substantially to changes in price, it means they are sensitive to price changes, and this is referred to as price elasticity of supply. Therefore, choice C is correct.

Question 4

An increase in the price of pure chocolate morsels from $3.25 to $3.45 causes Nestle to increase production from 125 bags per minute to 145 bags per minute.What do we know about the elasticity of supply

Accepted Answer

The elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. The percentage change in quantity is ((145-125)/125)*100 = 16%, and the percentage change in price is ((3.45-3.25)/3.25)*100 = 6.15%. Elasticity = 16% / 6.15% = 2.60, which is approximately 2.48, indicating that supply is elastic.

Question 5

If the elasticity of supply of a product is greater than 1,then what is supply

Accepted Answer

If the elasticity of supply of a product is greater than 1, it means that a small change in price will cause a relatively larger change in the quantity supplied. Therefore, the supply is considered to be elastic.

Question 6

When will the supply of a good be more elastic

Accepted Answer

When the time period being considered is longer, producers have more time to adjust their production levels in response to changes in price. This flexibility leads to a more elastic supply, as compared to a shorter time period where production adjustments may be limited.

Question 7

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct

Accepted Answer

The steeper supply curve is more inelastic because it indicates that quantity supplied is less responsive to price changes compared to the flatter curve.

Question 8

What is a key determinant of the elasticity of supply

Accepted Answer

The elasticity of supply is determined by the ability of sellers to change the amount of the good they produce, or in other words, the flexibility of their production process. If sellers can easily and quickly adjust their production in response to changes in price or demand, the supply of the good will be more elastic (responsive), while if they cannot adjust production easily, the supply will be more inelastic (less responsive).

Question 9

In the short run,how responsive is the quantity supplied to price changes

Accepted Answer

In the short run, the quantity supplied is not very responsive to price changes because producers may not be able to quickly adjust production levels due to fixed inputs and capacity constraints.

Question 10

What happens as elasticity of supply rises

Accepted Answer

As elasticity of supply rises, producers are more responsive to changes in price, meaning they can increase or decrease the quantity supplied to a greater extent. This results in a flatter supply curve as the quantity supplied is more elastic or sensitive to price changes.

Question 11

If sellers do not respond at all to a change in price,what do we know

Accepted Answer

If sellers do not respond at all to a change in price, it means the supply is perfectly inelastic, which indicates that the quantity supplied will not change no matter how much the price changes. This could happen in situations where the production of goods involves a fixed amount of resources, or when there are no available substitutes for a particular good, and suppliers cannot adjust the output or increase the supply to match the change in price.

Question 12

If an increase in the price of a good results in an increase in total revenue for the firm,what must the supply of the good be

Accepted Answer

If an increase in price leads to an increase in total revenue, it means that the demand for the product is inelastic. In this case, the firm can increase the price without losing too many customers, and therefore total revenue will increase. If the supply were elastic, then an increase in price would lead to a decrease in total revenue. Therefore, the best choice is B - inelastic supply.

Question 13

What does the price elasticity of supply measure

Accepted Answer

The price elasticity of supply measures how responsive sellers are to a change in price. It shows the percentage change in quantity supplied in response to a percentage change in price.

Question 14

If the quantity supplied responds only slightly to changes in price,what can be said about supply

Accepted Answer

If the quantity supplied responds only slightly to changes in price, it means the supply is not very responsive to price changes, and therefore inelastic.

Question 15

If a 30 percent change in price causes a 10 percent change in quantity supplied,what do we know about the price elasticity of supply

Accepted Answer

The price elasticity of supply is calculated by taking the percentage change in quantity supplied divided by the percentage change in price. In this case, a 30% change in price causes a 10% change in quantity supplied. Therefore:
Price elasticity of supply = (% change in quantity supplied) / (% change in price)
Price elasticity of supply = 10%/30%
Price elasticity of supply = 1/3
Since the price elasticity of supply is less than 1, supply is considered inelastic. Therefore, choice B is the correct answer.

Question 16

When a supply curve is relatively flat,what do we know

Accepted Answer

When a supply curve is relatively flat, it indicates that there is a relatively minor change in quantity supplied in response to any given change in price. This suggests that supply is relatively elastic, meaning that producers are able to adjust their output levels in response to changes in market conditions. In other words, as the price of a good or service changes, suppliers can easily adjust their production to meet demand, resulting in a significant change in the quantity supplied.

Question 17

What is the main determinant of the price elasticity of supply

Accepted Answer

Time is the main determinant of the price elasticity of supply. It takes time for producers to adjust their production levels in response to changes in price. If a producer can quickly and easily adjust their production levels, then their supply will be more elastic. However, if it takes a long time for a producer to adjust their production levels, then their supply will be more inelastic.

Question 18

In the long run,how does the quantity supplied of most goods respond

Accepted Answer

In the long run, producers have more flexibility to adjust their production levels and make changes to their inputs and technology. As a result, the quantity supplied of most goods can respond substantially to a change in price. This means that if the price of a good increases, producers will typically increase their quantity supplied to take advantage of the higher profits. Similarly, if the price of a good decreases, producers may reduce their quantity supplied to avoid losses.

Question 19

Holding all else constant,if a pencil manufacturer increases production by 25 percent when the market price of pencils increases from $0.50 to $0.60,what is the price elasticity of supply,using the midpoint method

Accepted Answer

Using the midpoint method, the percentage change in quantity supplied is 25%, and the percentage change in price is (0.60 - 0.50) / ((0.60 + 0.50) / 2) = 0.10 / 0.55 = 18.18%. The price elasticity of supply is 25% / 18.18% = 1.38, which is elastic.

Question 20

Figure 5-9
 
-Refer to Figure 5-9.What is the price elasticity of supply from point A to point C,using the midpoint method

Accepted Answer

The midpoint method calculates elasticity using the average percentage change in quantity and price. The formula is: (Q2 - Q1) / [(Q2 + Q1)/2] divided by (P2 - P1) / [(P2 + P1)/2]. Using this method, the price elasticity of supply from point A to point C is 0.750.

Quiz 5: Elasticity and Its Application