Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. A key determinant of the price elasticity of supply is the time period under consideration. Which of the following
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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
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
$5.00
Quantity Supplied
500
600
600
900
400
700
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
$7.00
Quantity Supplied
200
300
300
400
400
500
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.
54. A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t-shirt
maker would be willing to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t-shirts is
about
a.
0.37, and supply is elastic.
b.
0.37, and supply is inelastic.
c.
2.71, and supply is elastic.
d.
2.71, and supply is inelastic.
55. 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 elasticity 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.
56. 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.
