Question 1

A perfectly elastic supply curve is vertical, and a perfectly elastic demand curve is horizontal.

Accepted Answer

A perfectly elastic supply curve is horizontal, indicating that suppliers are willing to supply any quantity at a specific price. A perfectly elastic demand curve is vertical, indicating that consumers are willing to buy any quantity at a specific price.

Question 2

If a 2 percent increase in price results in a 1 percent increase in the quantity supplied, the price elasticity of supply is 2.

Accepted Answer

The price elasticity of supply in this scenario would be 0.5, not 2. Price elasticity of supply measures the responsiveness of quantity supplied to a change in price, and is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, a 2 percent increase in price results in a 1 percent increase in quantity supplied, which translates to a price elasticity of supply of (1%/2%) = 0.5.

Question 3

Elasticity of supply is
A) the responsiveness of supply to changes in costs.
B) the percentage change in quantity supplied due to a percentage change in price.
C) the responsiveness of the price to changes in supply.
D) 1 minus the elasticity of demand.
E) the change in quantity supplied due to a change in quantity demanded.

Accepted Answer

Elasticity of supply is the degree of responsiveness of the quantity supplied of a product to a change in its price. It is measured by the percentage change in quantity supplied due to a percentage change in price.

Question 4

The price elasticity of supply is a unit-free measure and uses percentage changes in quantity supplied and price to measure how sensitive supply is to a change in price.

Accepted Answer

The statement is true. The price elasticity of supply is a unit-free measure that uses percentage changes in quantity supplied and price to measure the responsiveness of supply to a change in price.

Question 5

A price elasticity of supply of 1.5 implies that
A) a 20 percent increase in the quantity supplied increases the price by 30 percent.
B) total revenue is 1.5 times total cost.
C) a 20 percent increase in the price increases the quantity supplied by 30 percent.
D) a 20-unit increase in supply reduces the price by $30.
E) a $20 increase in the price increases the quantity supplied by 30 units.

Accepted Answer

A price elasticity of supply of 1.5 means that a 1 percent increase in price leads to a 1.5 percent increase in quantity supplied. Using this information, a 20 percent increase in price would lead to a 30 percent increase in quantity supplied (20% x 1.5 = 30%). Therefore, choice C is correct.

Question 6

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?
A) It cannot be determined from the information given.
B) .02
C) 25
D) 50
E) .04

Accepted Answer

The answer of Assume that a firm makes available 50...

Question 7

Supply is elastic if the quantity supplied responds substantially to a change in price, and supply is inelastic if the quantity supplied responds only slightly to a change in price.

Accepted Answer

This statement correctly defines the concepts of elastic and inelastic supply.

Question 8

A unit elastic supply curve is vertical.

Accepted Answer

A unit elastic supply curve is neither vertical nor horizontal, it is intermediate between the two. It means that a proportional change in price will lead to an equal proportional change in quantity supplied.

Question 9

For a given shift in demand, the less elastic is supply, the
A) greater is the shift in demand.
B) greater is the change in equilibrium quantity.
C) smaller is the shift in demand.
D) greater is the change in price.
E) smaller is the change in price.

Accepted Answer

When supply is less elastic, it means that producers are unable to quickly adjust their production level in response to a change in demand. Therefore, a shift in demand will result in a greater change in price, as the producers are unable to increase their output to meet the increase in demand, leading to a shortage and increased prices.

Question 10

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

This is the standard definition of price elasticity of supply.

Question 11

If supply is perfectly elastic, then the supply curve must
A) be vertical.
B) be horizontal.
C) be upward sloping.
D) be downward sloping.
E) have a slope of zero.

Accepted Answer

If supply is perfectly elastic, then the producers are willing to supply any quantity at a fixed price. This means that the supply curve will be horizontal at that fixed price.

Question 12

If the quantity supplied of a good is fixed at 100 units at all price levels, then its price elasticity of supply is
A) perfectly elastic.
B) unit elastic.
C) perfectly inelastic.
D) zero.
E) undefined.

Accepted Answer

If the quantity supplied of a good is fixed at 100 units at all price levels, then its price elasticity of supply is equal to zero, indicating perfectly inelastic supply. This is because the quantity supplied does not change in response to any change in price.

Question 13

The concept that explains to what degree price changes when there is a shift in demand, other things being equal, is
A) income elasticity of demand.
B) price elasticity of demand.
C) price elasticity of supply.
D) cost elasticity of supply.
E) cross-price elasticity of demand.

Accepted Answer

The answer of The concept that explains to what degree...

Question 14

Price elasticity of supply is 1 minus the price elasticity of demand.

Accepted Answer

Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price, while price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. They are two separate measures and not directly related in the way stated in the statement.

Question 15

If supply is perfectly inelastic, then the price elasticity of supply is infinity.

Accepted Answer

If supply is perfectly inelastic, it means that the quantity supplied does not change at all when the price changes. In this case, the price elasticity of supply is zero, not infinity. The formula for price elasticity of supply is (% change in quantity supplied)/(% change in price). If the denominator (% change in price) is zero, the entire expression becomes undefined (not infinity).

Question 16

When a given percentage change in the price leads to a larger percentage change in the quantity supplied, supply is said to be
A) elastic.
B) unit elastic.
C) inelastic.
D) infinitely elastic.
E) perfectly inelastic.

Accepted Answer

When a given percentage change in price leads to a larger percentage change in quantity supplied, supply is said to be elastic, indicating a responsive supply curve. This is because producers are able to adjust their production levels quickly in response to changes in price.

Question 17

The price elasticity of supply is always negative.

Accepted Answer

The price elasticity of supply can be positive, negative, or zero, depending on the responsiveness of the quantity supplied to a change in price. However, it is most commonly positive or zero, indicating that an increase in price leads to an increase in quantity supplied, or that quantity supplied remains constant regardless of price.

Question 18

When a higher price cannot bring about any increase in the quantity supplied, the supply is
A) perfectly elastic.
B) unit elastic.
C) zero.
D) perfectly inelastic.
E) infinity.

Accepted Answer

When a higher price cannot bring about any increase in the quantity supplied, the supply is said to be perfectly inelastic. This means that no matter the increase in price, the quantity supplied remains the same.

Question 19

Supply may be elastic, unit elastic, or inelastic.

Accepted Answer

This statement is true. Supply can be classified as elastic, unit elastic, or inelastic depending on how much the quantity supplied changes in response to a change in price.

Question 20

If the quantity supplied of a product stays the same no matter what its price, then the elasticity of supply of the product is
A) perfectly elastic.
B) unit elastic.
C) zero.
D) perfectly inelastic.
E) infinity.

Accepted Answer

If the quantity supplied of a product stays the same no matter what its price is, the supply curve would be a vertical line, and the elasticity of supply would be perfectly inelastic. This could occur if the production of the good requires a fixed amount of resources or if the production process cannot be adjusted quickly in response to price changes.

Quiz 4: Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

A perfectly elastic supply curve is vertical, and a perfectly elastic demand curve is horizontal.

If a 2 percent increase in price results in a 1 percent increase in the quantity supplied, the price elasticity of supply is 2.

Elasticity of supply is

The price elasticity of supply is a unit-free measure and uses percentage changes in quantity supplied and price to measure how sensitive supply is to a change in price.

A price elasticity of supply of 1.5 implies that

Assume that a firm makes available 50 more units of a good at a price of $2 than it made available when the price was $1. What is the price elasticity of supply?

Supply is elastic if the quantity supplied responds substantially to a change in price, and supply is inelastic if the quantity supplied responds only slightly to a change in price.

A unit elastic supply curve is vertical.

For a given shift in demand, the less elastic is supply, the

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

If supply is perfectly elastic, then the supply curve must

If the quantity supplied of a good is fixed at 100 units at all price levels, then its price elasticity of supply is

The concept that explains to what degree price changes when there is a shift in demand, other things being equal, is

Price elasticity of supply is 1 minus the price elasticity of demand.

If supply is perfectly inelastic, then the price elasticity of supply is infinity.

When a given percentage change in the price leads to a larger percentage change in the quantity supplied, supply is said to be

The price elasticity of supply is always negative.

When a higher price cannot bring about any increase in the quantity supplied, the supply is

Supply may be elastic, unit elastic, or inelastic.

If the quantity supplied of a product stays the same no matter what its price, then the elasticity of supply of the product is