Question 1

The price elasticity of supply
A) is the slope of the supply curve.
B) is the percentage change in quantity supplied divided by the percentage change in price.
C) is always negative.
D) does not vary between the long and the short run.

Accepted Answer

The price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price. It is a measure of the responsiveness of quantity supplied to changes in price. It can be positive or negative depending on the nature of the supply curve. In the long run, supply can become more elastic due to factors such as the entry of new firms or the development of new technology, but in the short run, supply is usually less elastic.

Question 2

If the supply curve is vertical, then supply is
A) relatively elastic.
B) perfectly elastic.
C) unit elastic.
D) perfectly inelastic.

Accepted Answer

A vertical supply curve indicates that there is no change in the quantity supplied, regardless of any change in price. This is known as perfectly inelastic supply.

Question 3

When the price of computer printers decreased from $100 to $85, the number of computer printers produced fell from 1,000 per week to 850 per week. Using this information, we know the supply of computer printers is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.

Accepted Answer

The answer of When the price of computer printers decreased...

Question 4

If a 1 percent increase in price causes a 0.5 percent increase in quantity supplied, then supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) infinite.

Accepted Answer

Supply is considered inelastic when the percentage change in quantity supplied is less than the percentage change in price, which is the case here (0.5% increase in quantity supplied for a 1% increase in price).

Question 5

The most important determinant of the elasticity of supply is
A) whether the good is a durable good or a nondurable good.
B) the price of the good.
C) the time period firms have to adjust to the new price.
D) the proportion of the good in the budget of consumers.

Accepted Answer

The most important determinant of elasticity of supply is the time period firms have to adjust to the new price. In the short run, firms may not be able to increase their production even if the price of the good increases, therefore, the supply will be relatively inelastic. In the long run, firms have more time to adjust their production, for example by investing in new machinery or hiring more workers, which makes supply more elastic. The other options - whether the good is durable or nondurable, the price of the good, and the proportion of the good in the budget of consumers - may also have an impact on the elasticity of supply, but they are not the most important determinants.

Question 6

If a good's price increases by 2 percent, then its quantity supplied increases by more than 2 percent. This means
A) supply is elastic.
B) supply is unit-elastic.
C) supply is inelastic.
D) the good has good substitutes.

Accepted Answer

When the quantity supplied of a good changes by a greater percentage than the change in price, it indicates that supply is elastic. This suggests that suppliers are able and willing to adjust their production and allocate more resources to it in response to an increase in price.

Question 7

Price elasticity of supply is always
A) positive because of the law of supply.
B) negative because of the law of supply.
C) positive because of diminishing marginal utility.
D) negative because percentages can only be negative.

Accepted Answer

The law of supply states that as the price of a good increases, the quantity supplied also increases. Therefore, price elasticity of supply is always positive.

Question 8

In the long run, the supply curve
A) is more elastic than it is in the short run.
B) is less elastic than it is in the short run.
C) exhibits no systematic sequence of changes in elasticity.
D) exhibits no change in elasticity at all.

Accepted Answer

The long run allows firms to adjust their production processes more fully, so they have more flexibility in changing the quantity of output supplied in response to a change in price. This increased flexibility leads to a more elastic supply curve in the long run.

Question 9

When quantity supplied is very responsive to a change in price, supply is
A) elastic.
B) unit-elastic.
C) inelastic.
D) income sensitive.

Accepted Answer

When a change in price leads to a proportionately large change in the quantity supplied, supply is said to be elastic. This means that suppliers are very responsive to changes in the market price, and are able to adjust their production levels accordingly. In general, elastic supply occurs when there is a significant amount of spare capacity in the production process, such that suppliers can easily increase or decrease output in response to changes in demand.

Question 10

A vertical supply curve may be described as being
A) relatively elastic.
B) perfectly inelastic.
C) relatively inelastic.
D) perfectly elastic.

Accepted Answer

A vertical supply curve is perfectly inelastic, meaning that the quantity supplied does not change regardless of the price.

Question 11

If a 5 percent increase in price causes a 10 percent increase in quantity supplied, then supply is
A) elastic.
B) inelastic.
C) unit elastic.
D) infinite.

Accepted Answer

When a small change in price leads to a significant change in the quantity supplied, we can say that supply is elastic. In this case, a 5 percent increase in price causes a 10 percent increase in quantity supplied, which means the percentage change in quantity supplied is greater than the percentage change in price. Hence, supply is elastic.

Question 12

When quantity supplied is NOT very responsive to a change in price, supply is
A) elastic.
B) unit-elastic.
C) inelastic.
D) income sensitive.

Accepted Answer

When quantity supplied is not very responsive to a change in price, supply is said to be inelastic. This means that a change in price will not have a significant impact on the quantity supplied. Inelastic supply occurs when the cost of producing the goods is high and cannot be easily adjusted in the short run.

Question 13

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?
A) 0.47
B) -0.47
C) -2.11
D) 2.11

Accepted Answer

The answer of When the Gizmo Company could sell a...

Question 14

Changes in technology over time will result in
A) a more inelastic supply curve.
B) a more elastic supply curve.
C) a unitary elastic supply curve.
D) no change in the elasticity of supply.

Accepted Answer

Changes in technology over time typically lead to a more elastic supply curve. This is because technological advancements often make it easier and more efficient to produce goods, which in turn makes it easier for firms to increase production in response to changes in price. As a result, the quantity supplied is more responsive to changes in price, making the supply curve more elastic.

Question 15

If the quantity supplied stays the same no matter what the price is, then supply is
A) perfectly inelastic.
B) perfectly elastic.
C) unit elastic.
D) undefined.

Accepted Answer

When the quantity supplied remains unchanged even if there is a change in price, it indicates that the supply is perfectly inelastic. It means that the producers are unable to increase or decrease the amount supplied, regardless of what the price is.

Question 16

We expect the price elasticity of supply to be
A) negative.
B) positive.
C) between -1 and +1.
D) zero.

Accepted Answer

The price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good. It is typically positive because, according to the law of supply, an increase in price leads to an increase in the quantity supplied.

Question 17

An 36 percent increase in the price of small cars results in a 20 percent increase in the quantity supplied. The supply elasticity in this range equals ________.
A) 9/5
B) 5/9
C) 7/10
D) 4/10

Accepted Answer

Elasticity of supply = (% change in quantity supplied)/(% change in price)
Given, % change in price = 36%
And % change in quantity supplied = 20%
By substituting in the elasticity of supply formula, we get:
Elasticity of supply = (20%/36%) = 5/9

Question 18

We generally expect the price elasticity of supply to be
A) zero.
B) negative.
C) positive.
D) positive or negative, depending on demand.

Accepted Answer

Price elasticity of supply measures the responsiveness of the quantity supplied to changes in price. A positive elasticity indicates that a change in price causes a proportionally larger change in quantity supplied. This is generally expected because when prices increase, suppliers have an incentive to produce and sell more in order to earn higher profits. Therefore, they will be more responsive to changes in price.

Question 19

OLED television prices rise by 10 percent, and in response the quantity of those OLED televisions supplied increases by 5 percent. The supply elasticity for OLED television sets in that price range is
A) 0.5.
B) 1.5.
C) 2.0.
D) -2.0.

Accepted Answer

The supply elasticity is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 5% / 10% = 0.5.

Question 20

The price elasticity of supply measures
A) the responsiveness of quantity demanded to a change in price.
B) the responsiveness of quantity supplied to a change in price.
C) the change in supply due to a change in input prices.
D) the change in price due to a change in quantity supplied.

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. Specifically, it measures the percentage change in quantity supplied that results from a one percent change in price. A higher price elasticity of supply indicates that suppliers are more responsive to changes in price and are willing and able to change their quantity supplied to a greater extent.

Quiz 19: Demand and Supply Elasticity

The price elasticity of supply

If the supply curve is vertical, then supply is

When the price of computer printers decreased from $100 to $85, the number of computer printers produced fell from 1,000 per week to 850 per week. Using this information, we know the supply of computer printers is

If a 1 percent increase in price causes a 0.5 percent increase in quantity supplied, then supply is

The most important determinant of the elasticity of supply is

If a good's price increases by 2 percent, then its quantity supplied increases by more than 2 percent. This means

Price elasticity of supply is always

In the long run, the supply curve

When quantity supplied is very responsive to a change in price, supply is

A vertical supply curve may be described as being

If a 5 percent increase in price causes a 10 percent increase in quantity supplied, then supply is

When quantity supplied is NOT very responsive to a change in price, supply is

When the Gizmo Company could sell a gizmo for $10, it produced 2,500 per month. More recently, the price of a gizmo has fallen to $9 and so Gizmo is only producing 2,000 units per month. What is the price elasticity of supply for gizmos?

Changes in technology over time will result in

If the quantity supplied stays the same no matter what the price is, then supply is

We expect the price elasticity of supply to be

An 36 percent increase in the price of small cars results in a 20 percent increase in the quantity supplied. The supply elasticity in this range equals ________.

We generally expect the price elasticity of supply to be

OLED television prices rise by 10 percent, and in response the quantity of those OLED televisions supplied increases by 5 percent. The supply elasticity for OLED television sets in that price range is

The price elasticity of supply measures