Question 1

When the price of knee braces increased by 25 percent,the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent.BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, it would be 75% / 25% = 3.

Question 2

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%,then the price must have decreased by 3%.

Accepted Answer

The answer of If the price elasticity of supply is...

Question 3

Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of another good changes.

Accepted Answer

Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good.

Question 4

The cross-price elasticity of demand for bacon and eggs likely would be negative because bacon and eggs are complements for many people.

Accepted Answer

Bacon and eggs are often consumed together and therefore are complements. When the price of one increases (e.g. bacon), the demand for the other (e.g. eggs) may decrease, resulting in a negative cross-price elasticity of demand.

Question 5

OPEC failed to maintain a high price of oil in the long run,partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

Both the supply of oil and the demand for oil can adjust in the long run, through changes in production levels and consumer behavior respectively, which makes it difficult for OPEC to maintain a high price of oil in the long run.

Question 6

If we observe that when the price of ice cream rises by 10%,ice cream manufacturers increase the quantity supplied of ice cream by 20%,then the price elasticity of supply is 2.

Accepted Answer

Price elasticity of supply is the measure of the responsiveness of the quantity supplied to a change in the price of a product. In this case, if the price of ice cream rises by 10% and ice cream manufacturers increase the quantity supplied by 20%, then the price elasticity of supply can be calculated as follows:

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

= 20% / 10%

= 2

Therefore, the statement is true and the answer is A.

Question 7

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

Reducing land under cultivation typically decreases the supply of agricultural products, which can lead to higher prices for consumers. Farmers might benefit from higher prices for their products, but consumers face increased costs.

Question 8

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

By reducing the amount of corn on the market, the supply decreases, and the price of corn increases. This can benefit farmers who do choose to plant corn, as they can sell their crop at a higher price. Additionally, the subsidy payments can provide extra income for farmers who may not have been able to plant anyway due to various reasons such as weather conditions or lack of resources.

Question 9

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

Price elasticity of supply measures the responsiveness of quantity supplied to changes in price. It is the percentage change in quantity supplied divided by the percentage change in price.

Question 10

Cross-price elasticity is used to determine whether goods are substitutes or complements.

Accepted Answer

Cross-price elasticity measures the responsiveness of demand for one good to changes in the price of another related good. If the cross-price elasticity is positive, it means that the goods are substitutes (an increase in the price of one good will increase the demand for the other). If the cross-price elasticity is negative, it means that the goods are complements (an increase in the price of one good will decrease the demand for the other).

Question 11

If a supply curve is horizontal,then supply is said to be perfectly elastic,and the price elasticity of supply approaches infinity.

Accepted Answer

When a supply curve is perfectly elastic, small changes in price will result in infinite changes in quantity supplied, resulting in an infinitely high price elasticity of supply.

Question 12

The cross-price elasticity of garlic salt and onion salt is -2,which indicates that garlic salt and onion salt are substitutes.

Accepted Answer

A negative cross-price elasticity indicates that the goods are complements, not substitutes.

Question 13

If the cross-price elasticity of demand for two goods is negative,then the two goods are complements.

Accepted Answer

This is because a negative cross-price elasticity means that an increase in the price of one good leads to a decrease in the quantity demanded of the other good. This indicates that the two goods are complements, as they are typically consumed together and a decrease in the demand for one leads to a decrease in the demand for the other.

Question 14

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

The answer of A discovery that increases wheat yields per...

Question 15

Supply and demand both tend to be more elastic in the long run and more inelastic in the short run.

Accepted Answer

In the long run, both supply and demand have more time to adjust to changes in price and market conditions, leading to more elasticity. In the short run, there may be constraints on production capacity or consumer behavior that limit the ability of firms or individuals to respond to price changes, leading to less elasticity.

Question 16

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12,the price elasticity of supply is 2.

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the quantity supplied increases from 1,000 to 1,200 (a 20% increase) when the price increases from $10 to $12 (a 20% increase), resulting in a price elasticity of supply of 1 (20%/20%).

Question 17

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

This statement is incorrect. Supply is said to be inelastic if the quantity supplied responds only slightly to changes in the price, and elastic if the quantity supplied responds substantially to price.

Question 18

Cross-price elasticity is used to determine whether goods are inferior or normal goods.

Accepted Answer

Cross-price elasticity measures the responsiveness of demand for one good to a change in the price of a different good. It does not determine whether goods are inferior or normal goods.

Question 19

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer