Question 1

If the quantity supplied and the price change by the same percentage,then supply is

Accepted Answer

If the percentage change in quantity supplied is equal to the percentage change in price, then elasticity of supply is 1, or unit elastic. This means that the percentage change in quantity supplied is equal in magnitude to the percentage change in price.

Question 2

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the

Accepted Answer

Price elasticity of supply measures the responsiveness of the quantity supplied to changes in the price of a good or service. Therefore, when the price changes, the quantity supplied changes, and the price elasticity of supply can be determined. A, B, C, and E may affect the supply of a good or service, but they are not specifically measurements of price elasticity of supply.

Question 3

If the price of a good decreases from $9 to $6 and the quantity supplied decreases from 1,500 to 1,300,using the midpoint formula the elasticity of supply equals

Accepted Answer

Using the midpoint formula:

Elasticity of supply = [(1,300-1,500)/((1,300+1,500)/2)] / [(6-9)/((6+9)/2)]

Elasticity of supply = [-200/1400] / [-3/7]

Elasticity of supply = 0.36

Therefore, the best choice is C, 0.36.

Question 4

Supply is unit elastic when the

Accepted Answer

Unit elasticity of supply means that the percentage change in the quantity supplied is equal to the percentage change in price. This occurs when the supply curve is neither perfectly elastic (horizontal) nor perfectly inelastic (vertical). Therefore, choice C is the correct answer.

Question 5

When the percentage change in the quantity supplied is twice the percentage change in price,then supply is

Accepted Answer

When the percentage change in the quantity supplied is greater than the percentage change in price, the supply is elastic. In this case, the percentage change in quantity supplied is twice the percentage change in price, indicating that suppliers are very responsive to price changes and supply is elastic.

Question 6

For a product with a rapidly increasing opportunity cost of producing additional units,

Accepted Answer

A rapidly increasing opportunity cost of producing additional units indicates that the supply curve is becoming steeper and less elastic. This means that the price must increase in order to incentivize firms to produce more. Therefore, supply is price inelastic.

Question 7

If the price of a DVD falls from $20 to $12 and the quantity of DVDs supplied decreases from 118,000 per hour to 100,000 per hour,using the midpoint formula the elasticity of supply equals

Accepted Answer

The elasticity of supply is calculated using the midpoint formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Substituting the given values: [(100,000 - 118,000) / (109,000)] / [(12 - 20) / (16)] = (-18,000 / 109,000) / (-8 / 16) = -0.1651 / -0.5 = 0.33.

Question 8

If the price doubles and the quantity supplied also doubles,the price elasticity of supply for the good is

Accepted Answer

Price elasticity of supply is calculated by dividing the percentage change in quantity supplied by the percentage change in price. In this case, if the price doubles and the quantity supplied also doubles, we get:

Percentage change in quantity supplied = ((New quantity supplied - Old quantity supplied) / Old quantity supplied) x 100
= ((2Q - Q) / Q) x 100
= (Q / Q) x 100
= 100 percent

Percentage change in price = ((New price - Old price) / Old price) x 100
= ((2P - P) / P) x 100
= (P / P) x 100
= 100 percent

Therefore, price elasticity of supply = (100 percent / 100 percent) = 1, which means that the supply of the good is perfectly elastic.

Question 9

The price elasticity of supply equals the percentage change in the

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. This tells us how responsive producers are to changes in the price of a good.

Question 10

If a 20 percent increase in the price of a good does not change the quantity supplied,the

Accepted Answer

If a 20 percent increase in price does not result in any change in the quantity supplied, it means that the supply is not responsive to changes in price. This is the definition of perfectly inelastic supply.

Question 11

If a firm supplies 200 units at a price of $50 and 100 units at a price of $40,using the midpoint method,what is the price elasticity of supply?

Accepted Answer

The price elasticity of supply (PES) using the midpoint method is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, the change in quantity supplied is from 100 to 200 units (a change of 100 units), and the change in price is from $40 to $50 (a change of $10). Using the midpoint formula, PES = [(200 - 100) / ((200 + 100) / 2)] / [($50 - $40) / (($50 + $40) / 2)] = (100 / 150) / (10 / 45) = (2/3) / (2/9) = 3.00.

Question 12

Because the price elasticity of supply for jumbo jets is 0.35,the supply of jumbo jets is

Accepted Answer

With a price elasticity of supply of 0.35, the supply of jumbo jets is inelastic. This means that a change in price will result in a proportionately smaller change in quantity supplied. In other words, if the price of jumbo jets were to increase, the quantity supplied would not increase by a large amount, as the supply is relatively fixed in the short term.

Question 13

Goods that can be produced at a constant or very gently rising opportunity cost have

Accepted Answer

Goods that can be produced at a constant or very gently rising opportunity cost have an elastic supply because producers can easily increase the quantity supplied without incurring significant increases in their production costs.

Question 14

When the price of a product increases from $35 to $45,the quantity supplied increases from 30 units to 40 units per week.Using the midpoint method,the price elasticity of supply is

Accepted Answer

The midpoint formula is:
Elasticity of supply=(%change in quantity supplied/%change in price)=((Q2-Q1)/((Q2+Q1)/2))/((P2-P1)/((P2+P1)/2))

Using the given values:
Elasticity of supply=((40-30)/((40+30)/2))/((45-35)/((45+35)/2))
=((10/35)*((2/3)/(10/8)))
=1.14

Therefore, the price elasticity of supply is 1.14, indicating that the supply is relatively elastic.

Question 15

When the price of a textbook is $95,the quantity of textbooks supplied is 90 million a year and when the price rises to $105,the quantity of textbooks supplied is 110 million a year.The supply of textbooks is

Accepted Answer

The formula for price elasticity of supply (PES) is:
% change in quantity supplied / % change in price

Using the information given, we can calculate the PES as follows:
% change in quantity supplied = (110 million - 90 million) / 90 million x 100% = 22.22%
% change in price = ($105 - $95) / $95 x 100% = 10.53%

PES = 22.22% / 10.53% = 2.11

Since the PES value is greater than 1, the supply of textbooks is elastic. This means that a change in price will cause a relatively larger change in the quantity supplied.

Question 16

The supply of beach front property on St.Simon's Island is

Accepted Answer

The supply of beach front property on St.Simon's Island is likely inelastic, as there are likely limited quantities of beach front property available and the cost of production (e.g. land, construction) may not greatly influence the willingness of sellers to provide these properties.

Question 17

The greater the amount of time that passes after a price change,the

Accepted Answer

Over time, producers can adjust their production levels, resources, and processes in response to price changes, making supply more elastic.

Question 18

Many manufactured goods have an ________ supply if production plans have only a short period to change and as time passes and all production adjustments are made,the supply of the good ________ from the initial response.

Accepted Answer

In the short term, the supply of many manufactured goods is inelastic because producers cannot quickly adjust production levels. Over time, as producers adjust, the supply becomes more elastic, meaning it increases from the initial response when adjustments to production are fully made.

Question 19

If the price elasticity of supply for a good is 10,then supply is

Accepted Answer

The price elasticity of supply is defined as the percentage change in quantity supplied of a good or service resulting from a 1 percent change in its price, all other factors being constant. If the price elasticity of supply is greater than 1, then supply is said to be elastic, meaning that a change in price leads to a proportionally larger change in quantity supplied. In this case, since the elasticity is 10, supply is highly responsive to price changes, and hence elastic.

Question 20

When supply is perfectly inelastic,the supply curve is

Accepted Answer

When supply is perfectly inelastic, it means that no matter the change in price, the quantity supplied remains the same. In other words, the supply curve is perfectly vertical, or at a 90 degree angle to the x-axis. This is because the quantity supplied does not respond to changes in the price, so the supply curve does not change at all.

Quiz 5: Elasticities of Demand and Supply