Question 1

When a supply curve is relatively flat,

Accepted Answer

A relatively flat supply curve indicates that sellers are relatively responsive to a change in price, meaning that a small change in price will result in a larger change in quantity supplied. This indicates that the supply is relatively elastic.

Question 2

If the price elasticity of supply for wheat is less than 1,then the supply of wheat is

Accepted Answer

When the price elasticity of supply (PES) for a product is less than 1, it indicates that the percentage change in the quantity supplied is less than the percentage change in price. This means that the supply of wheat does not respond much to changes in price, and is hence considered inelastic. In other words, even if the price of wheat increases, the increase in the quantity supplied is relatively less.

Question 3

Some firms eventually experience problems with their capacity to produce output as their output levels increase.For these firms,

Accepted Answer

The answer of Some firms eventually experience problems with their...

Question 4

If two supply curves pass through the same point and one is steep and the other is flat,which of the following statements is correct?

Accepted Answer

A steeper supply curve indicates a more responsive supply, meaning that a change in price will result in a larger change in quantity supplied. Therefore, the steeper supply curve represents a supply that is relatively more elastic compared to the flatter supply curve, and option B is the correct choice. Option A is incorrect because the flatter supply curve represents a supply that is relatively more elastic, not inelastic. Option C is incorrect because the price elasticity of supply depends on the steepness of the curve, and thus will be different for the two curves. Option D is irrelevant to the information provided in the question.

Question 5

Which of the following statements is not valid when supply is perfectly elastic?

Accepted Answer

When supply is perfectly elastic, any change in price will result in an infinite change in quantity supplied, regardless of the time period. Therefore, option D is not valid since it implies that the time period could affect the elasticity of supply, which is not the case when supply is perfectly elastic.

Question 6

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 elasticity of supply for bagels is about

Accepted Answer

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

Question 7

If sellers do not adjust their quantities supplied at all in response to a change in price,

Accepted Answer

This scenario describes a situation of perfectly inelastic supply, where the quantity supplied does not change at all in response to a change in price. This could occur if the product being sold has limited availability or if production costs are fixed and cannot be adjusted to increase supply.

Question 8

A linear,upward-sloping supply curve has

Accepted Answer

A linear, upward-sloping supply curve has a constant slope because it represents a proportional relationship between the price and quantity supplied. However, the elasticity of supply changes along the curve because as the price increases, it becomes more profitable for producers to increase their output, which means that supply becomes more elastic at higher prices. As such, the correct answer is A.

Question 9

In the long run,the quantity supplied of most goods

Accepted Answer

The quantity supplied of most goods can respond substantially to a change in price. This is because as the price of a good increases, suppliers are motivated to produce and sell more of that good in order to increase their profits. On the other hand, as the price of a good decreases, suppliers may choose to decrease production or shift their resources to producing a different good that provides a higher profit margin. This is known as the law of supply, which holds that there is a positive relationship between price and quantity supplied.

Question 10

If a 30 percent change in price causes a 15 percent change in quantity supplied,then the price elasticity of supply is

Accepted Answer

The answer of If a 30 percent change in price...

Question 11

If the price elasticity of supply is zero,then

Accepted Answer

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

Question 12

If the quantity supplied is the same regardless of price,then supply is

Accepted Answer

If the quantity supplied remains constant irrespective of price, then supply is said to be perfectly inelastic. This means that even if the price changes, the quantity supplied will not change.

Question 13

A key determinant of the price elasticity of supply is the time period under consideration.Which of the following statements best explains this fact?

Accepted Answer

Over longer periods, firms can adjust their production capacity, enter or exit the market, and make other changes, making supply more elastic.

Question 14

When supply is perfectly elastic,the value of the price elasticity of supply is

Accepted Answer

When supply is perfectly elastic, any change in price will result in an infinite change in quantity supplied. Therefore, the value of price elasticity of supply is infinity.

Question 15

Which of the following statements is valid when the market supply curve is vertical?

Accepted Answer

A vertical supply curve indicates that the quantity supplied is fixed and does not change with price, meaning supply is perfectly inelastic.

Question 16

Which of the following would be true as the price elasticity of supply approaches infinity?

Accepted Answer

The answer of Which of the following would be true...

Question 17

In January the price of widgets was $2.00 and Wendy's Widgets produced 80 widgets.In February the price of widgets was $2.50 and Wendy's Widgets produced 110 widgets.In March the price of widgets was $3.00 and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was

Accepted Answer

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

% change in quantity supplied / % change in price

Price increased from $2.00 to $2.50, which is a 25% increase:

% change in price = ((2.5 - 2.0) / 2.0) x 100% = 25%

Quantity supplied increased from 80 to 110 widgets, which is a 37.5% increase:

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

Using these values in the formula gives us:

% change in quantity supplied / % change in price = 37.5 / 25 = 1.5

Therefore, the price elasticity of supply for this price increase is 1.5.

Price increased from $2.50 to $3.00, which is a 20% increase:

% change in price = ((3.0 - 2.5) / 2.5) x 100% = 20%

Quantity supplied increased from 110 to 140 widgets, which is a 27.3% increase:

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

Using these values in the formula gives us:

% change in quantity supplied / % change in price = 27.3 / 20 = 1.365

Therefore, the price elasticity of supply for this price increase is 1.365.

The closest option to these values is choice C.

Question 18

If the supply curve for news magazines is an upward-sloping line and goes through the point (quantity supplied = 0,price = $1.00),then the price elasticity of supply for news magazines is

Accepted Answer

The supply curve is upward-sloping and starts at a positive price when quantity is zero, indicating that the percentage change in quantity supplied is greater than the percentage change in price, which means the price elasticity of supply is greater than one.

Question 19

If an increase in the price of a good results in an increase in total revenue for the firm,then the supply of the good must be

Accepted Answer

The information given pertains to price elasticity of demand, not supply. An increase in price leading to higher total revenue indicates inelastic demand, but it does not provide information about the elasticity of supply.

Question 20

As price elasticity of supply increases,the supply curve

Accepted Answer

As price elasticity of supply increases, it means that a small change in price leads to a larger change in quantity supplied. This is reflected in a flatter supply curve.

Quiz 5: Elasticity and Its Applications