Question 1

The price elasticity of supply equals the percentage change in the
A) quantity demanded divided by the percentage change in the price of a substitute or complement.
B)quantity supplied divided by the percentage change in price.
C)quantity demanded divided by the percentage change in price.
D)supply divided by the percentage change in the demand.
E)quantity supplied divided by the percentage change in the quantity demanded.

Accepted Answer

Price elasticity of supply measures the responsiveness of the quantity supplied to a change in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price. Thus, option B is the correct answer. Options A, C, D, and E are either incorrect or do not represent price elasticity of supply.

Question 2

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.
A)inelastic; increases
B)elastic; decreases
C)elastic; increases
D)inelastic; decreases
E)inelastic; does not change

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 3

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
A)elastic
B)perfectly elastic
C)inelastic
D)perfectly inelastic
E)unit elastic.

Accepted Answer

The change in quantity supplied (20 million) is relatively large compared to the change in price ($10). This indicates that the supply of textbooks is relatively responsive to changes in price, making it elastic.

Question 4

Because the price elasticity of supply for jumbo jets is 0.35, the supply of jumbo jets is
A)elastic.
B)unit elastic.
C)inelastic.
D)perfectly elastic.
E)perfectly inelastic.

Accepted Answer

A price elasticity of supply (PES) between 0 and 1 is considered to be inelastic, meaning that a change in price has a proportionately smaller effect on the change in quantity supplied. A PES of 0.35 is closer to 0 than 1, making it inelastic. Therefore, the supply of jumbo jets is more responsive to changes in price, indicating a limited ability to adjust the quantity supplied in response to price changes.

Question 5

Supply is unit elastic when the
A)supply curve is upward sloping.
B)price elasticity of supply is positive.
C)percentage change in the quantity supplied equals the percentage change in price.
D)supply curve is horizontal.
E)supply curve is vertical.

Accepted Answer

When the percentage change in the quantity supplied equals the percentage change in price, the price elasticity of supply is 1 or unit elastic.

Question 6

Goods that can be produced at a constant or very gently rising opportunity cost have
A)an elastic demand.
B)an inelastic demand.
C)an inelastic supply.
D)an elastic supply.
E)a unit elastic demand.

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 7

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the
A)income elasticity of demand.
B)cross elasticity of demand.
C)price elasticity of demand.
D)price elasticity of supply.
E)cross income elasticity of demand.

Accepted Answer

The measurement described here is cross elasticity of demand. Cross elasticity of demand measures how much the demand for a good or service changes when the price of a related good or service changes. Specifically, it measures the percentage change in the quantity demanded of one good when the price of another good changes, all else being equal.

Question 8

When the percentage change in the quantity supplied is twice the percentage change in price, then supply is
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly inelastic.
E)perfectly elastic.

Accepted Answer

This is the definition of elastic supply - when the percentage change in quantity supplied is greater than the percentage change in price. In this case, the ratio is 2:1, meaning a small change in price leads to a relatively larger change in the quantity supplied.

Question 9

If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is
A)greater than one and supply is elastic.
B)negative and supply is inelastic.
C)less than one and supply is elastic.
D)less than one and supply is inelastic.
E)greater than one and supply is inelastic.

Accepted Answer

The formula for elasticity of supply is percent change in quantity supplied / percent change in price. In this case, the percent change in price is 10% and the percent change in quantity supplied is 5%. Thus, the elasticity of supply is 5%/10% = 0.5, which is less than one. According to the rule of thumb, when the elasticity of supply is less than one, supply is inelastic.

Question 10

When supply is perfectly inelastic, the supply curve is
A)upward sloping but not a straight line.
B)vertical.
C)downward sloping.
D)horizontal.
E)a straight line with a 45 degree slope that goes through the origin.

Accepted Answer

A vertical supply curve means that the quantity supplied remains constant regardless of changes in price. This indicates a perfectly inelastic supply because there is no change in the quantity supplied as price changes.

Question 11

The price elasticity of supply is a measure of the extent to which the quantity supplied of a good changes when the
A)cost of producing the product increases.
B)quantity of the good demanded increases.
C)supply increases.
D)price changes.
E)number of firms supplying the good changes.

Accepted Answer

The price elasticity of supply measures how much the quantity supplied of a good changes in response to a change in its price. As the price of a good increases, firms may be able to increase the quantity supplied by investing in more resources (e.g. hiring more workers, buying more equipment, etc.), but this takes time, so in the short-run, the quantity supplied may be relatively inelastic. However, in the long-run, firms may be able to increase their production significantly, making the quantity supplied more elastic. So, the price elasticity of supply depends on the time horizon under consideration.

Question 12

If the quantity supplied and the price change by the same percentage, then supply is
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly elastic.
E)perfectly inelastic.

Accepted Answer

If the quantity supplied and the price change by the same percentage, the elasticity of supply is equal to one, which is known as unit elastic supply. This means that the percentage change in quantity supplied is equal to the percentage change in price.

Question 13

The greater the amount of time that passes after a price change, the
A)less elastic supply becomes.
B)more elastic supply becomes.
C)more negative supply becomes.
D)steeper the supply curve becomes.
E)None of the above answers is correct.

Accepted Answer

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

Question 14

For a product with a rapidly increasing opportunity cost of producing additional units,
A)demand is price elastic.
B)supply is price elastic.
C)demand is price inelastic.
D)supply is price inelastic.
E)the demand curve is vertical.

Accepted Answer

When a product has a rapidly increasing opportunity cost of producing additional units, it indicates that the supply is limited and cannot be increased easily. Hence, the supply is price inelastic as the producers cannot quickly respond to changes in demand by increasing the production of the product.

Question 15

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?
A)0.33
B)1.00
C)3.00
D)5.00
E)8.50

Accepted Answer

Price elasticity of supply (PES) can be calculated using the midpoint method with the following formula:

PES = ((Q2 - Q1) / ((Q2 + Q1)/2)) / ((P2 - P1) / ((P2 + P1)/2))

Where Q1 and Q2 are the quantity supplied at two different prices P1 and P2 respectively.

Using the given values, we can calculate PES as:

PES = ((100 - 200)/ ((100 + 200)/2)) / (($40 - $50)/ (($40 + $50)/2))
    = (-100/150) / (-10/45)
    = (2/3) / (2/9)
    = (2/3) * (9/2)
    = 3

Therefore, the price elasticity of supply is 3, which is highest for option C (3.00).

Question 16

The supply of beachfront property on St.Simon's Island is
A)elastic.
B)unit elastic.
C)negative.
D)inelastic.
E)perfectly elastic.

Accepted Answer

The supply of beachfront property on St. Simon's Island is likely to be inelastic because the amount of land available for development is fixed and cannot be easily increased or decreased in the short run. As a result, changes in demand for beachfront property are more likely to result in changes in the price of the property rather than changes in the quantity supplied.

Question 17

If the quantity supplied increases by 8 percent when the price rises by 2 percent, the price elasticity of supply is ________ .
A)10.0
B)6.0
C)0.25
D)16.0
E)4.0

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Therefore, it is $ \frac{8\%}{2\%} = 4.0 $.

Question 18

If a 20 percent increase in the price of a good does not change the quantity supplied, the
A)supply is perfectly inelastic.
B)supply is unit elastic.
C)supply is perfectly elastic.
D)supply is elastic.
E)None of the above answers is correct.

Accepted Answer

When a 20 percent increase in price does not result in a change in quantity supplied, it means that the supply is insensitive to price changes. This is indicative of a perfectly inelastic supply, which means that the quantity supplied remains the same regardless of changes in price.

Question 19

The cross elasticity of demand is a measure of how
A)responsive consumers are to changes in the price of a product.
B)responsive suppliers are to changes in the price of a product.
C)demand for a product changes when the price of a substitute or complement changes.
D)total revenue changes when the price of a product changes.
E)demand for a product changes when income changes.

Accepted Answer

Cross elasticity of demand measures the responsiveness of demand for a product when the price of a substitute or complement product changes.

Question 20

If the price elasticity of supply for a good is 10, then supply is
A)elastic.
B)inelastic.
C)unit elastic.
D)perfectly elastic.
E)perfectly inelastic.

Accepted Answer

A price elasticity of supply of 10 means that a 1% increase in price will lead to a 10% increase in quantity supplied. This indicates a relatively large response to changes in price, which is characteristic of elastic supply.

Quiz 5: Elasticities of Demand and Supply

The price elasticity of supply equals the percentage change in the

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.

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

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

Supply is unit elastic when the

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

The extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same, is measured as the

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

If the price of a a good increases by 10 percent and the quantity supplied increases by 5 percent, then the elasticity of supply is

When supply is perfectly inelastic, the supply curve is

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

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

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

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

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?

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

If the quantity supplied increases by 8 percent when the price rises by 2 percent, the price elasticity of supply is ________ .

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

The cross elasticity of demand is a measure of how

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