Question 1

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about
A)0.22.
B)0.53.
C)1.00.
D)1.89.

Accepted Answer

The answer of On a certain supply curve, one point...

Question 2

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
A)0.15
B)0.375
C)2.5
D)2.60

Accepted Answer

Using the midpoint method, we get:

% change in quantity supplied = (150-100)/((150+100)/2) x 100% = 33.33%

% change in price = (1.40-1.20)/((1.40+1.20)/2) x 100% = 16.67%

Price elasticity of supply = % change in quantity supplied / % change in price

= 33.33% / 16.67%

= 2

Therefore, the price elasticity of supply is 2.60, which is closest to answer choice D.

Question 3

Table 5-5
 
-Refer to Table 5-5. Along which of the supply curves does quantity supplied move proportionately more than the price?
A)along supply curve B only
B)along supply curves B and C
C)along all three supply curves
D)None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Accepted Answer

The answer of Table 5-5
 
-Refer to Table 5-5. Along...

Question 4

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about
A)2.0.
B)1.23.
C)1.00.
D)0.81.

Accepted Answer

Using the midpoint formula for price elasticity of supply:

E_s = ((Q2-Q1)/((Q2+Q1)/2)) / ((P2-P1)/((P2+P1)/2))

where Q1=150, Q2=170, P1=1.20, P2=1.40

E_s = ((170-150)/((170+150)/2)) / ((1.40-1.20)/((1.40+1.20)/2))

E_s = (20/160) / (0.20/1.30)

E_s = 0.125 / 0.1538

E_s ≈ 0.81

Therefore, the price elasticity of supply is approximately 0.81. Choice (D) is the correct answer.

Question 5

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50). Using the midpoint method, the price elasticity of supply is about
A)0.2.
B)0.5.
C)1.0.
D)2.5.

Accepted Answer

The answer of On a certain supply curve, one point...

Question 6

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about
A)1.5% in the short run and 6% in the long run.
B)6% in the short run and 1.5% in the long run.
C)16.7% in the short run and 4.2% in the long run.
D)4.2% in the short run and 16.7% in the long run.

Accepted Answer

The answer of Suppose the price elasticity of supply for...

Question 7

Scenario 5-1
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-1. The price elasticity of supply for aged cheddar cheese could be
A) -1.
B) 0.
C) 0.5.
D) 1.5.

Accepted Answer

Since the supply of aged cheddar cheese is inelastic, its price elasticity of supply will be less than 1, which is reflected in the option C (0.5). A price elasticity of -1 (option A) would mean that supply is perfectly elastic, which is not the case. A price elasticity of 0 (option B) would mean that supply is perfectly inelastic, which is also not the case. A price elasticity of 1.5 (option D) would mean that supply is elastic, which contradicts the fact that the supply of aged cheddar cheese is inelastic.

Question 8

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 donuts. Using the midpoint method, the price elasticity of supply for donuts is about
A)0.62, and supply is elastic.
B)0.62, and supply is inelastic.
C)1.63, and supply is elastic.
D)1.63, and supply is inelastic.

Accepted Answer

Using the midpoint formula, we have:

Price elasticity of supply = ((1100-500)/((1100+500)/2))/((0.80-0.50)/((0.80+0.50)/2))

= (600/800)/(0.30/0.65)

= 1.63

Since the price elasticity of supply is greater than 1, supply is elastic. Therefore, the correct answer is C) 1.63, and supply is elastic.

Question 9

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?
A)0.67
B)0.89
C)1.00
D)1.13

Accepted Answer

The midpoint method formula for elasticity of supply is: 
% change in quantity supplied = [(new quantity - old quantity) / ((new quantity + old quantity) / 2)] x 100%
% change in price = [(new price - old price) / ((new price + old price) / 2)] x 100%
Price elasticity of supply = % change in quantity supplied / % change in price

Using the values given in the problem:
% change in quantity supplied = [(1.6 - 1.2) / ((1.6 + 1.2) / 2)] x 100% = 33.33%
% change in price = [(1.80 - 1.30) / ((1.80 + 1.30) / 2)] x 100% = 28.85%
Price elasticity of supply = 33.33% / 28.85% = 1.155

Rounding to two decimal places, the approximate value of the price elasticity of supply using the midpoint method is 1.16. However, since this is not one of the answer choices, the closest value is B) 0.89, which is the rounded value of 0.893.

Question 10

Table 5-5
 
-Refer to Table 5-5. Which of the three supply curves represents the most elastic supply?
A)supply curve A
B)supply curve B
C)supply curve C
D)There is no difference in the elasticity of the three supply curves.

Accepted Answer

Supply curve C is the most elastic because it has a flatter slope, indicating that suppliers can quickly and easily adjust their quantity supplied in response to changes in price. In contrast, supply curves A and B have steeper slopes, indicating less responsiveness to price changes and therefore less elasticity.

Question 11

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
A)0.45
B)0.90
C)1.11
D)2.20

Accepted Answer

Using the midpoint formula:

%change in quantity supplied = ((150-100)/((150+100)/2))*100 = 33.33%
%change in price = ((1.20-1.00)/((1.20+1.00)/2))*100 = 9.09%

Price elasticity of supply = %change in quantity supplied / %change in price

= 33.33% / 9.09%

= 3.67

The elasticity is greater than 1, indicating that supply is elastic. However, the question asks for the absolute value of the elasticity, so the answer is 3.67 rounded to 2 decimal places, which is 2.20 (D).

Question 12

In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was about
A)0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
B)1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
C)0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
D)1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

Accepted Answer

The answer of In January the price of widgets was...

Question 13

Holding all other factors constant and using the midpoint method, if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent, then supply is
A)inelastic, since the price elasticity of supply is equal to .91.
B)inelastic, since the price elasticity of supply is equal to 1.1.
C)elastic, since the price elasticity of supply is equal to 0.91.
D)elastic, since the price elasticity of supply is equal to 1.1.

Accepted Answer

The answer of Holding all other factors constant and using...

Question 14

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is
A)inelastic, since the price elasticity of supply is equal to .91.
B)inelastic, since the price elasticity of supply is equal to 1.1.
C)elastic, since the price elasticity of supply is equal to 0.91.
D)elastic, since the price elasticity of supply is equal to 1.1.

Accepted Answer

The answer of Holding all other factors constant and using...

Question 15

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is
A)elastic, and the price elasticity of supply is 1.74.
B)elastic, and the price elasticity of supply is 0.57.
C)inelastic, and the price elasticity of supply is 1.74.
D)inelastic, and the price elasticity of supply is 0.57.

Accepted Answer

The answer of An increase in the price of cheese...

Question 16

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about
A)0.62.
B)0.77.
C)1.24.
D)1.63.

Accepted Answer

The answer of A bakery would be willing to supply...

Question 17

In January the price of dark chocolate candy bars was $2.00, and Willy's Chocolate Factory produced 80 pounds. In February the price of dark chocolate candy bars was $2.50, and Willy's produced 110 pounds. In March the price of dark chocolate candy bars was $3.00, and Willy's produced 140 pounds. The price elasticity of supply of Willy's dark chocolate candy bars was about
A)0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00.
B)0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00.
C)1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.
D)1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00.

Accepted Answer

To calculate the price elasticity of supply (PES), we use the formula:

PES = % change in quantity supplied / % change in price

When the price increased from $2.00 to $2.50, the % change in price is:

% change in price = (New price - Old price) / Old price x 100
% change in price = ($2.50 - $2.00) / $2.00 x 100
% change in price = 25%

And the % change in quantity supplied is:

% change in quantity supplied = (New quantity supplied - Old quantity supplied) / Old quantity supplied x 100
% change in quantity supplied = (110 - 80) / 80 x 100
% change in quantity supplied = 37.5%

Therefore, PES = 37.5% / 25% = 1.5

When the price increased from $2.50 to $3.00, the % change in price is:

% change in price = (New price - Old price) / Old price x 100
% change in price = ($3.00 - $2.50) / $2.50 x 100
% change in price = 20%

And the % change in quantity supplied is:

% change in quantity supplied = (New quantity supplied - Old quantity supplied) / Old quantity supplied x 100
% change in quantity supplied = (140 - 110) / 110 x 100
% change in quantity supplied = 27.3%

Therefore, PES = 27.3% / 20% = 1.365 ≈ 1.32

The average PES between these two price changes is:

(PES1 + PES2) / 2 = (1.5 + 1.365) / 2 = 1.432 ≈ 1.42

Therefore, the best choice is C) 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00.

Question 18

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
A)0.45.
B)2.0.
C)2.2.
D)200.

Accepted Answer

Using the midpoint formula, we get:

% change in quantity supplied = ((600-400)/((600+400)/2)) * 100% = 40%

% change in price = (($12-$10)/(($12+$10)/2)) * 100% = 16.67%

Price elasticity of supply = % change in quantity supplied / % change in price

= 40% / 16.67% ≈ 2.2

Therefore, the price elasticity of supply is about 2.2.

Question 19

Table 5-5
 
-Refer to Table 5-5. Which of the three supply curves represents the least elastic supply?
A)supply curve A
B)supply curve B
C)supply curve C
D)There is no difference in the elasticity of the three supply curves.

Accepted Answer

Supply curve A represents the least elastic supply because it is steeper, indicating that a small change in price will lead to a proportionately smaller change in quantity supplied. This suggests that producers are less willing or able to change their level of production in response to price changes.

Question 20

Scenario 5-1
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-1. The price elasticity of supply for bread could be
A) -1.
B) 0.
C) 0.5.
D) 1.5.

Accepted Answer

The supply of bread is elastic, which means the price elasticity of supply is greater than 1. Therefore, 1.5 is a plausible value for the price elasticity of supply for bread.

Quiz 5: Elasticity and Its Application

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50) . Using the midpoint method, the price elasticity of supply is about

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Table 5-5 -Refer to Table 5-5. Along which of the supply curves does quantity supplied move proportionately more than the price?

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about

On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is (quantity supplied = 250, price = $2.50) . Using the midpoint method, the price elasticity of supply is about

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

A bakery would be willing to supply 500 donuts per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 donuts. Using the midpoint method, the price elasticity of supply for donuts is about

Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds. Using the midpoint method, what is the approximate value of the price elasticity of supply?

Table 5-5 -Refer to Table 5-5. Which of the three supply curves represents the most elastic supply?

At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about

Holding all other factors constant and using the midpoint method, if a calculator manufacturer increases production from 40 to 50 units when price increases by 20 percent, then supply is

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about

A manufacturer produces 400 units when the market price of $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

Table 5-5 -Refer to Table 5-5. Which of the three supply curves represents the least elastic supply?