Chapter 5/Elasticity and Its Application/ ❖ 61
41. Cross-price elasticity of demand measures how
a.
the price of one good changes in response to a change in the price of another good.
b.
the quantity demanded of one good changes in response to a change in the quantity demanded of
another good.
c.
the quantity demanded of one good changes in response to a change in the price of another good.
d.
strongly normal or inferior a good is.
42. The cross-price elasticity of demand can tell us whether goods are
a.
normal or inferior.
b.
elastic or inelastic.
c.
luxuries or necessities.
d.
complements or substitutes.
43. If the cross-price elasticity of two goods is negative, then the two goods are
a.
necessities.
b.
complements.
c.
normal goods.
d.
inferior goods.
44. If the cross-price elasticity of two goods is positive, then the two goods are
a.
substitutes.
b.
complements.
c.
normal goods.
d.
inferior goods.
45. Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20
percent increase in the price of hot dogs will cause the quantity of mustard purchased to
a.
fall by 200 percent.
b.
fall by 40 percent.
c.
rise by 200 percent.
d.
rise by 40 percent.
46. If two goods are substitutes, their cross-price elasticity will be
a.
positive.
b.
negative.
c.
zero.
d.
equal to the difference between the income elasticities of demand for the two goods.
62 ❖ Chapter 5/Elasticity and Its Application
47. If two goods are complements, their cross-price elasticity will be
a.
positive.
b.
negative.
c.
zero.
d.
equal to the difference between the income elasticities of demand for the two goods.
48. For which pairs of goods is the cross-price elasticity most likely to be positive?
a.
peanut butter and jelly
b.
bicycle frames and bicycle tires
c.
pens and pencils
d.
college textbooks and iPods
49. For which pairs of goods is the cross-price elasticity most likely to be negative?
a.
peanut butter and jelly
b.
automobile tires and coffee
c.
pens and pencils
d.
paperback novels and electronic books for e-readers
50. If the cross-price elasticity of demand for two goods is 1.25, then
a.
the two goods are luxuries.
b.
the two goods are substitutes.
c.
one of the goods is normal and the other good is inferior.
d.
the demand for one of the goods conforms to the law of demand, but the demand for the other good
violates the law of demand.
51. If the cross-price elasticity of demand for two goods is -4.5, then
a.
the two goods are substitutes.
b.
the two goods are complements.
c.
one of the goods is normal while the other good is inferior.
d.
one of the goods is a luxury while the other good is a necessity.
52. Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per
pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per
pound. Sandra’s cross-price elasticity of demand for coffee and milk is
a.
0.82, and they are substitutes.
b.
-0.82, and they are complements.
c.
1.22, and they are substitutes.
d.
-1.22, and they are complements.
Chapter 5/Elasticity and Its Application/ ❖ 63
THE ELASTICITY OF SUPPLY
1. A key determinant of the price elasticity of supply is the
a.
time horizon.
b.
income of consumers.
c.
price elasticity of demand.
d.
importance of the good in a consumer’s budget.
2. A key determinant of the price elasticity of supply is the
a.
number of close substitutes for the good in question.
b.
extent to which buyers alter their quantities demanded in response to changes in prices.
c.
length of the time period.
d.
extent to which buyers alter their quantities demanded in response to changes in their incomes.
3. A key determinant of the price elasticity of supply is
a.
the ability of sellers to change the price of the good they produce.
b.
the ability of sellers to change the amount of the good they produce.
c.
how responsive buyers are to changes in sellers’ prices.
d.
the slope of the demand curve.
4. The price elasticity of supply measures how much
a.
the quantity supplied responds to changes in input prices.
b.
the quantity supplied responds to changes in the price of the good.
c.
the price of the good responds to changes in supply.
d.
sellers respond to changes in technology.
5. The price elasticity of supply measures how responsive
a.
sellers are to a change in price.
b.
sellers are to a change in buyers’ income.
c.
buyers are to a change in production costs.
d.
equilibrium price is to a change in supply.
6. The price elasticity of supply measures how responsive
a.
equilibrium price is to equilibrium quantity.
b.
sellers are to a change in buyers’ income.
c.
sellers are to a change in price.
d.
consumers are to the number of substitutes.
64 ❖ Chapter 5/Elasticity and Its Application
7. A linear, upward-sloping supply curve has
a.
a constant slope and a changing price elasticity of supply.
b.
a changing slope and a constant price elasticity of supply.
c.
both a constant slope and a constant price elasticity of supply.
d.
both a changing slope and a changing price elasticity of supply.
8. A key determinant of the price elasticity of supply is the time period under consideration. Which of the follow-
ing statements best explains this fact?
a.
Supply curves are steeper over long periods of time than over short periods of time.
b.
Buyers of goods tend to be more responsive to price changes over long periods of time than over
short periods of time.
c.
The number of firms in a market tends to be more variable over long periods of time than over short
periods of time.
d.
Firms prefer to change their prices in the short run rather than in the long run.
9. Some firms eventually experience problems with their capacity to produce output as their output levels in-
crease. 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.
10. 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.
11. 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.
Chapter 5/Elasticity and Its Application/ ❖ 65
12. 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.
13. 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%.
14. If the price elasticity of supply is 0.2, and a price increase led to a 3% increase in quantity supplied, then the
price increase is about
a.
0.07%.
b.
0.60%.
c.
6%.
d.
15%.
15. 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%.
16. 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%.
66 ❖ Chapter 5/Elasticity and Its Application
17. 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%.
18. 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%.
19. Suppose the price elasticity of supply for candles is 0.3 in the short run and 1.2 in the long run. If an increase
in the demand for candles causes the price of candles to increase by 36%, then the quantity supplied of candles
will increase by about
a.
0.8% in the short run and 3.3% in the long run.
b.
1.2% in the short run and 0.3% in the long run.
c.
10.8% in the short run and 43.2% in the long run.
d.
120% in the short run and 30% in the long run.
20. 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 in-
crease 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.
21. Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an in-
crease 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.
Scenario 5-1
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%.
Chapter 5/Elasticity and Its Application/ ❖ 67
22. Refer to Scenario 5-1. The price elasticity of supply for aged cheddar cheese could be
a.
–1.
b.
0.
c.
0.5.
d.
1.5.
23. Refer to Scenario 5-1. The price elasticity of supply for bread could be
a.
–1.
b.
0.
c.
0.5.
d.
1.5.
Table 5-5
Supply Curve A
Supply Curve B
Supply Curve C
Price
$1.00
$2.00
$1.00
$3.00
$2.00
$5.00
Quantity
Supplied
500
600
600
900
400
700
24. Refer to Table 5-5. 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.
25. Refer to Table 5-5. 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.
26. Refer to Table 5-5. 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.
68 ❖ Chapter 5/Elasticity and Its Application
27. A manufacturer produces 400 units when the market price of $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.
28. 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
29. 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
30. 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.
31. 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.
Chapter 5/Elasticity and Its Application/ ❖ 69
32. Holding all other factors constant and using the midpoint method, if a candy manufacturer increases produc-
tion 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.
33. Holding all other factors constant and using the midpoint method, if a calculator manufacturer increases pro-
duction from 40 to 50 units when price increases by 20 percent, 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.
34. Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases the quantity of mel-
ons 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
35. 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.
36. 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 bak-
ery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for ba-
gels is about
a.
0.62.
b.
0.77.
c.
1.24.
d.
1.63.
70 ❖ Chapter 5/Elasticity and Its Application
37. A bakery would be willing to supply 500 donuts per day at a price of $0.50 each. At a price of $0.80, the bak-
ery would be willing to supply 1,100 donuts. Using the midpoint method, the price elasticity of supply for do-
nuts is about
a.
0.62, and supply is elastic.
b.
0.62, and supply is inelastic.
c.
1.63, and supply is elastic.
d.
1.63, and supply is inelastic.
38. In January the price of dark chocolate candy bars was $2.00, and Willy’s Chocolate Factory produced 80
pounds. In February the price of dark chocolate candy bars was $2.50, and Willy’s produced 110 pounds. In
March the price of dark chocolate candy bars was $3.00, and Willy’s produced 140 pounds. The price elastici-
ty of supply of Willy’s dark chocolate candy bars was about
a.
0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to
$3.00.
b.
0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to
$3.00.
c.
1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to
$3.00.
d.
1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to
$3.00.
39. In January the price of widgets was $1.00, and Wendy’s Widgets produced 80 widgets. In February the price
of widgets was $1.50, and Wendy‘s Widgets produced 110 widgets. In March the price of widgets was $2.00,
and Wendy‘s Widgets produced 140 widgets. The price elasticity of supply of Wendy‘s Widgets was about
a.
0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to
$2.00.
b.
1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to
$2.00.
c.
0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to
$2.00.
d.
1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to
$2.00.
40. At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the
manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply
is about
a.
2.0.
b.
1.23.
c.
1.00.
d.
0.81.
Chapter 5/Elasticity and Its Application/ ❖ 71
41. At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a
price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint
method, the price elasticity of supply is about
a.
1.14.
b.
1.00.
c.
0.875.
d.
0.50.
42. At price of $1.25, a paper manufacturer is willing to supply 150 spiral notebooks per day. At a price of $1.50,
the paper manufacturer is willing to supply 175 spiral notebooks per day. Using the midpoint method, the
price elasticity of supply is about
a.
1.18.
b.
1.00.
c.
0.85.
d.
0.25.
Figure 5-13
Supply
2
16
5
40
9
100
14
220
20
430
Quantity
Price
43. Refer to Figure 5-13. Over which range is the supply curve in this figure the most elastic?
a.
$16 to $40
b.
$40 to $100
c.
$100 to $220
d.
$220 to $430
44. Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic?
a.
$16 to $40
b.
$40 to $100
c.
$100 to $220
d.
$220 to $430
72 ❖ Chapter 5/Elasticity and Its Application
45. Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $16 and
$40?
a.
0.125
b.
0.86
c.
1.0
d.
2.5
46. Refer to Figure 5-13. Using the midpoint method, what is the price elasticity of supply between $100 and
$220?
a.
0.58
b.
0.67
c.
1.00
d.
1.73
Figure 5-14
A
B
C
D
G
H
Supply
25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425 450 475 500 525 550 575 Quantity
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Price
47. Refer to Figure 5-14. Along which of these segments of the supply curve is supply least elastic?
a.
GH
b.
CD
c.
AC
d.
AB
Chapter 5/Elasticity and Its Application/ ❖ 73
48. Refer to Figure 5-14. Along which of these segments of the supply curve is supply most elastic?
a.
AB
b.
CD
c.
DH
d.
GH
49. Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points A and
B?
a.
2.33
b.
1.0
c.
0.43
d.
0.1
50. Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points B and
C?
a.
1.67
b.
1.19
c.
0.84
d.
0.61
51. Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points C and
D?
a.
0.21
b.
0.29
c.
0.73
d.
1.36
52. Refer to Figure 5-14. Using the midpoint method, what is the price elasticity of supply between points D and
G?
a.
1.89
b.
1.26
c.
0.53
d.
0.34
74 ❖ Chapter 5/Elasticity and Its Application
Figure 5-15
Supply
510 15 20 25 30 35 40 Quantity
1
2
3
4
5
6
7
8
9
10 Price
53. Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $4 and $6?
a.
0.75
b.
1.00
c.
1.20
d.
1.25
54. Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between $6 and $8?
a.
0.86
b.
1.00
c.
1.17
d.
1.25
Chapter 5/Elasticity and Its Application/ ❖ 75
Figure 5-16
Supply
A
B
C
25 50 75 100 125 150 175 200 225 250 275 300 Quantity
2
4
6
8
Price
55. Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between point A and
point B?
a.
0.58
b.
0.71
c.
1.06
d.
1.4
56. Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between point B and
point C?
a.
1.44
b.
1.29
c.
0.96
d.
0.78
57. Refer to Figure 5-16. If, holding the supply curve fixed, there were an increase in demand that caused the
equilibrium price to increase from $6 to $8, then sellers’ total revenue would
a.
increase.
b.
decrease.
c.
remain unchanged.
d.
The effect on total revenue cannot be determined from the given information.
76 ❖ Chapter 5/Elasticity and Its Application
58. The supply of a good will be more elastic, the
a.
more the good is considered a luxury.
b.
broader is the definition of the market for the good.
c.
larger the number of close substitutes for the good.
d.
longer the time period being considered.
59. In the long run, the quantity supplied of most goods
a.
will increase in almost all cases, regardless of what happens to price.
b.
cannot respond at all to a change in price.
c.
can respond to a change in price, but the change is almost always inconsequential.
d.
can respond substantially to a change in price.
60. 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.
61. 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.
62. As price elasticity of supply increases, the supply curve
a.
becomes flatter.
b.
becomes steeper.
c.
becomes downward sloping.
d.
shifts to the right.
63. 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.
Chapter 5/Elasticity and Its Application/ ❖ 77
64. 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.
65. If the quantity supplied responds only slightly to changes in price, then
a.
supply is said to be elastic.
b.
supply is said to be inelastic.
c.
an increase in price will not shift the supply curve very much.
d.
even a large decrease in demand will change the equilibrium price only slightly.
66. Frequently, in the short run, the quantity supplied of a good is
a.
impossible, or nearly impossible, to measure.
b.
not very responsive to price changes.
c.
determined by the quantity demanded of the good.
d.
determined by psychological forces and other non-economic forces.
67. If the price elasticity of supply for wheat is less than 1, then the supply of wheat is
a.
inelastic.
b.
elastic.
c.
unit elastic.
d.
quite sensitive to changes in income.
68. 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.
69. 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.
78 ❖ Chapter 5/Elasticity and Its Application
70. 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.
71. If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large
amounts, the price elasticity of supply approaches
a.
zero, and the supply curve is horizontal.
b.
zero, and the supply curve is vertical.
c.
infinity, and the supply curve is horizontal.
d.
infinity, and the supply curve is vertical.
72. Which of the following statements is valid when supply is perfectly elastic at a price of $4?
a.
The elasticity of supply approaches infinity.
b.
The supply curve is vertical.
c.
At a price below $4, quantity supplied is infinite.
d.
At a price above $4, quantity supplied is zero.
73. Which of the following statements is not valid when supply is perfectly elastic?
a.
The elasticity of supply approaches infinity.
b.
The supply curve is horizontal.
c.
Very small changes in price lead to very large changes in quantity supplied.
d.
The time period under consideration is more likely a short period rather than a long period.
74. When supply is perfectly elastic, the value of the price elasticity of supply is
a.
0.
b.
1.
c.
greater than 0 and less than 1.
d.
infinity.
75. As the price elasticity of supply approaches infinity, very small changes in price lead to
a.
very large changes in quantity supplied.
b.
very small changes in quantity supplied.
c.
no change in quantity supplied.
d.
None of the above is correct.
Chapter 5/Elasticity and Its Application/ ❖ 79
76. If the price elasticity of supply for a good is equal to infinity, then the
a.
supply curve is vertical.
b.
supply curve is horizontal.
c.
supply curve also has a slope equal to infinity.
d.
quantity supplied is constant regardless of the price.
77. A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of sup-
ply is
a.
infinity.
b.
zero.
c.
one.
d.
negative one.
78. If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of sup-
ply is
a.
zero, and the supply curve is horizontal.
b.
zero, and the supply curve is vertical.
c.
infinity, and the supply curve is horizontal.
d.
infinity, and the supply curve is vertical.
79. Which of the following statements is valid when the market supply curve is vertical?
a.
Market quantity supplied does not change when the price changes.
b.
Supply is perfectly elastic.
c.
An increase in market demand will increase the equilibrium quantity.
d.
An increase in market demand will not increase the equilibrium price.
80. Which of the following statements is not valid when the market supply curve is vertical?
a.
Market quantity supplied does not change when the price changes.
b.
Supply is perfectly inelastic.
c.
An increase in market demand will increase the equilibrium quantity.
d.
An increase in market demand will increase the equilibrium price.
81. If the quantity supplied is the same regardless of price, then supply is
a.
elastic.
b.
perfectly elastic.
c.
perfectly inelastic.
d.
inelastic.
80 ❖ Chapter 5/Elasticity and Its Application
82. If sellers do not adjust their quantities supplied at all in response to a change in price,
a.
advances in technology must be prevalent.
b.
the time period under consideration must be very long.
c.
supply is perfectly elastic.
d.
supply is perfectly inelastic.
83. If the price elasticity of supply is zero, then
a.
supply is more elastic than it is in any other case.
b.
the supply curve is horizontal.
c.
the quantity supplied is the same, regardless of price.
d.
a change in demand will cause a relatively small change in the equilibrium price.
84. Which of the following is an illustration of the market for original paintings by deceased artist Vincent Van
Gogh?
a.
S
D
Quantity
Price
c.
S
D
Quantity
Price
b.
S
D
Quantity
Price
d.
S
D
Quantity
Price
a.
A
b.
B
c.
C
d.
D