14. Some firms eventually experience problems with their capacity to produce output as their output
levels increase. For these firms,
a. market power is substantial.
b. supply is perfectly inelastic.
c. supply is more elastic at low levels of output and less elastic at high levels of output.
d. supply is less elastic at low levels of output and more elastic at high levels of output.
15. Generally, a firm is more willing and able to increase quantity supplied in response to a price
change when
a. the relevant time period is short rather than long.
b. the relevant time period is long rather than short.
c. supply is inelastic.
d. the firm is experiencing capacity problems.
16. The price elasticity of supply along a typical supply curve is
a. constant.
b. equal to zero.
c. higher at low levels of quantity supplied and lower at high levels of quantity supplied.
d. lower at low levels of quantity supplied and higher at high levels of quantity supplied.
17. Suppose that two supply curves pass through the same point. One is steep, and the other is flat.
Which of the following statements is correct?
a. The flatter supply curve represents a supply that is inelastic relative to the supply represented
by the steeper supply curve.
b. The steeper supply curve represents a supply that is inelastic relative to the supply represented
by the flatter supply curve.
c. Given two prices with which to calculate the price elasticity of supply, that elasticity would be
the same for both curves.
d. A decrease in demand will increase total revenue if the steeper supply curve is relevant, while
a decrease in demand will decrease total revenue if the flatter supply cure is relevant.
18. When a supply curve is relatively flat, the
a. sellers are not at all responsive to a change in price.
b. equilibrium price changes substantially when the demand for the good changes.
c. supply is relatively elastic.
d. supply is relatively inelastic.
19. When a supply curve is relatively flat,
a. sellers are not very responsive to changes in price.
b. supply is relatively inelastic.
c. supply is relatively elastic.
d. Both a and b are correct.
20. As price elasticity of supply increases, the supply curve
a. becomes flatter.
b. becomes steeper.
c. becomes downward sloping.
d. shifts to the right.
21. If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity
supplied, then the price increase is about
a. 0.67%.
b. 0.83%.
c. 1.20%.
d. 2.70%.
22. If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in quantity
supplied, then the price increase is about
a. 0.25%.
b. 1.2%.
c. 2%.
d. 12.5%.
23. If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity
supplied, then the price increase is about
a. 0.2%.
b. 0.5%.
c. 2.0%.
d. 4.5%.
24. If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity
supplied, then the price increase is about
a. 0.24%.
b. 4.2%.
c. 6%.
d. 6.2%.
25. If the price elasticity of supply is 1.2, and price increased by 5%, quantity supplied would
a. increase by 4.2%.
b. increase by 6%.
c. decrease by 4.2%.
d. decrease by 6%.
26. If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would
a. increase by 4%.
b. increase by 6.25%.
c. decrease by 4%.
d. decrease by 6.25%.
27. If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of
supply is about
a. 0.63, and supply is elastic.
b. 0.63, and supply is inelastic.
c. 1.60, and supply is elastic.
d. 1.60, and supply is inelastic.
28. If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of
supply is about
a. 0.63, and supply is elastic.
b. 0.63, and supply is inelastic.
c. 1.60, and supply is elastic.
d. 1.60, and supply is inelastic.
29. If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of
supply is about
a. 1.33, and supply is elastic.
b. 1.33, and supply is inelastic.
c. 0.75, and supply is elastic.
d. 0.75, and supply is inelastic.
30. If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of
supply is about
a. 1.33, and supply is elastic.
b. 1.33, and supply is inelastic.
c. 0.75, and supply is elastic.
d. 0.75, and supply is inelastic.
31. If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price
elasticity of supply is about
a. 0.5, and supply is elastic.
b. 0.5, and supply is inelastic.
c. 2, and supply is inelastic.
d. 2, and supply is elastic.
32. Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If
an increase in the demand for cheese causes the price of cheese to increase by 15%, then the
quantity supplied of cheese will increase by
a. 0.4% in the short run and 4.6% in the long run.
b. 1.7% in the short run and 0.7% in the long run.
c. 9% in the short run and 21% in the long run.
d. 25% in the short run and 10.7% in the long run.
33. Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long
run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by
20%, then the quantity supplied of soccer balls will increase by about
a. 0.67% in the short run and 0.17% in the long run.
b. 3% in the short run and 1.2% in the long run.
c. 6% in the short run and 24% in the long run.
d. 66.7% in the short run and 16.7% in the long run.
34. Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If
an increase in the demand for minivans causes the price of minivans to increase by 5%, then the
quantity supplied of minivans will increase by about
a. 1.5% in the short run and 6% in the long run.
b. 6% in the short run and 1.5% in the long run.
c. 16.7% in the short run and 4.2% in the long run.
d. 4.2% in the short run and 16.7% in the long run.
35. If the price elasticity of supply for a window manufacturer is 1.5,
a. a 10% increase in the price of windows results in a 15% increase in the quantity of windows
supplied.
b. supply is considered to be inelastic.
c. the manufacturer is likely operating very near capacity.
d. All of the above are correct.
36. In which of the following situations would supply be the most elastic?
a. An auto parts manufacturer is operating at capacity.
b. A real estate developer in Boston is looking to build condos on the waterfront.
c. A furniture manufacturer is operating its factory 8 hours per day.
d. A hotel has all of its rooms booked for each night of the next 3 months.
Scenario 5-3
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic.
Both goods are considered to be normal goods by a majority of consumers. Suppose that a large
income tax increase decreases the demand for both goods by 10%.
37. Refer to Scenario 5-3. The price elasticity of supply for aged cheddar cheese could be
a. –1.
b. 0.
c. 0.5.
d. 1.5.
38. Refer to Scenario 5-3. The price elasticity of supply for bread could be
a. –1.
b. 0.
c. 0.5.
d. 1.5.
Table 5-9
Supply Curve A
Supply Curve B
Supply Curve C
Price
$1.00
$2.00
$1.00
$3.00
$2.00
Quantity
Supplied
500
600
600
900
400
39. Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
40. Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
41.
Refer to Table 5-9. Along which of the supply curves does quantity supplied move
proportionately more than the price?
a. along supply curve B only
b. along supply curves B and C
c. along all three supply curves
d. None. Quantity supplied moves proportionately less than the price along all of the three supply
curves.
Table 5-10
Supply Curve X
Supply Curve Y
Supply Curve Z
Price
$5.00
$7.00
$5.00
$7.00
$5.00
Quantity
Supplied
200
300
300
400
400
42. Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most
inelastic price elasticity of supply?
a. Supply curve X
b. Supply curve Y
c. Supply curve Z
d. There is no difference in the elasticities of the three supply curves.
43. Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most
elastic price elasticity of supply?
a. Supply curve X
b. Supply curve Y
c. Supply curve Z
d. There is no difference in the elasticity of the three supply curves.
44. A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units
when the market price is $12 per unit. Using the midpoint method, for this range of prices, the
price elasticity of supply is about
a. 0.45.
b. 2.0.
c. 2.2.
d. 200.
45. At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price
of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the
midpoint method, the price elasticity of supply is about
a. 0.45
b. 0.90
c. 1.11
d. 2.20
46. At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price
of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the
midpoint method, the price elasticity of supply is about
a. 0.15
b. 0.375
c. 2.5
d. 2.60
47. On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is
(quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply
is about
a. 0.22.
b. 0.53.
c. 1.00.
d. 1.89.
48. On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and another point is
(quantity supplied= 250, price = $2.50). Using the midpoint method, the price elasticity of supply is
about
a. 0.2.
b. 0.5.
c. 1.0.
d. 2.5.
49. Holding all other factors constant and using the midpoint method, if a candy manufacturer
increases production by 20 percent when the market price of candy increases from $0.50 to $0.60,
then supply is
a. inelastic, since the price elasticity of supply is equal to .91.
b. inelastic, since the price elasticity of supply is equal to 1.1.
c. elastic, since the price elasticity of supply is equal to 0.91.
d. elastic, since the price elasticity of supply is equal to 1.1.
50. Holding all other factors constant and using the midpoint method, if a tractor manufacturer
increases production from 80 to 100 units when price increases by 15 percent, then supply is
a. inelastic, since the price elasticity of supply is equal to 0.68.
b. inelastic, since the price elasticity of supply is equal to 1.48.
c. elastic, since the price elasticity of supply is equal to 0.68.
d. elastic, since the price elasticity of supply is equal to 1.48.
51. Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the
quantity of melons that melon farmers produce from 1.2 million pounds to 1.6 million pounds.
Using the midpoint method, what is the approximate value of the price elasticity of supply?
a. 0.67
b. 0.89
c. 1.00
d. 1.13
52. An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of
cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per
minute. Using the midpoint method, supply is
a. elastic, and the price elasticity of supply is 1.74.
b. elastic, and the price elasticity of supply is 0.57.
c. inelastic, and the price elasticity of supply is 1.74.
d. inelastic, and the price elasticity of supply is 0.57.
53. 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 price
elasticity of supply for bagels is about
a. 0.62.
b. 0.77.
c. 1.24.
d. 1.63.