Question 1

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 means that it becomes increasingly more expensive to produce each additional unit. This implies that the supply curve is upward-sloping and price inelastic. As production increases, the cost of production increases faster than the revenue gained from selling additional units, thus reducing the incentive for suppliers to produce more at higher prices. Therefore, the supply curve does not shift much in response to changes in price.

Question 2

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 proportionally greater than the change in price ($10), indicating that the supply of textbooks is elastic. This means that producers are able to increase their production significantly in response to a price increase, and vice versa.

Question 3

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

When supply is perfectly inelastic, the quantity supplied does not respond to changes in price at all. This means that no matter how much the price changes, the quantity supplied remains the same. Therefore, the supply curve is a straight vertical line.

Question 4

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 elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. Here, it is 5% / 10% = 0.5, which is less than one, indicating that supply is inelastic.

Question 5

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 6

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

The price elasticity of supply measures the responsiveness of the quantity supplied to a change in price, and is calculated as the percentage change in quantity supplied divided by the percentage change in price.

Question 7

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 can be calculated using the midpoint method:

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

Using the values given in the question:
Q1 = 200
Q2 = 100
P1 = 50
P2 = 40

Elasticity = ((100-200)/((200+100)/2))/((40-50)/((40+50)/2))
Elasticity = (-100/150)/(10/90)
Elasticity = (-2/3)/(1/9)
Elasticity = -6/3
Elasticity = -2

Since the elasticity is negative, it means that supply is price inelastic (i.e. the percentage change in quantity supplied is less than the percentage change in price). The absolute value of elasticity is 2, which means that a 1% increase in price would lead to a 2% decrease in quantity supplied.

Question 8

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

If a 20 percent increase in price does not change the quantity supplied, it means that the suppliers are not very responsive to the change in price. This indicates that the supply is perfectly inelastic.

Question 9

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 it is a limited resource with a fixed amount of land available for development. As a result, it would be difficult for developers to quickly increase the supply of beachfront property in response to changes in demand.

Question 10

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

When the percentage change in the quantity supplied is twice the percentage change in price, it indicates a greater degree of responsiveness by suppliers to changes in price. This is the definition of elasticity. Therefore, the correct choice is A) elastic.

Question 11

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 12

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

Unit elasticity of supply occurs when percentage changes in price result in equal percentage changes in quantity supplied, regardless of whether the supply curve is upward-sloping, horizontal, or vertical. Therefore, Choice C is the correct answer.

Question 13

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 less than one indicates inelastic supply. This means that the quantity supplied is not very responsive to changes in price. Jumbo jets are expensive and take a long time to manufacture, so it is difficult for suppliers to quickly change the quantity supplied in response to a change in price.

Question 14

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 extent to which demand for a good changes when the price of a substitute or complement changes is known as cross elasticity of demand. Income elasticity of demand measures the change in demand due to a change in income, while price elasticity of demand measures the change in demand due to a change in price. Price elasticity of supply measures the change in supply due to a change in price, and cross income elasticity of demand measures the change in demand for a good due to a change in income of another good's purchasers.

Question 15

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 16

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

Price elasticity of supply measures how much the quantity supplied of a good changes in response to a change in its price, while holding all other determinants of supply constant. Therefore, the correct option is D) price changes.

Question 17

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

When the quantity supplied and the price change by the same percentage, the price elasticity of supply is equal to one, which is known as unit elasticity. This means that the percentage change in quantity supplied is equal to the percentage change in price, indicating a proportional response to the price change.

Question 18

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 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 to changes in the price of a substitute or complement. The closer the substitutes, the higher the cross elasticity of demand. For complements, a decrease in the price of one good leads to an increase in demand for the other good, so the cross elasticity of demand is negative.

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 indicates that a 1% change in price will result in a 10% change in quantity supplied. This means that supply is highly responsive to changes in price, which is the definition of elastic.

Quiz 5: Elasticities of Demand and Supply

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

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

When supply is perfectly inelastic, the supply curve 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

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

The price elasticity of supply equals the percentage change in the

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?

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

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

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

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.

Supply is unit elastic when the

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

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

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

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

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

The cross elasticity of demand is a measure of how

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