Question 1

What does the elasticity of a perfectly elastic supply curve equal
A)0
B)1
C)infinity
D)a value less than 1 but greater than 0

Accepted Answer

The elasticity of a perfectly elastic supply curve is equal to infinity because any increase in price above the equilibrium price will result in an infinite increase in the quantity supplied as producers are willing to supply an infinite amount at any price above the equilibrium.

Question 2

Generally,over which time period will a firm be able to respond most to a change in price
A)in one month
B)in six months
C)in one year
D)in five years

Accepted Answer

In five years, a firm has the most time to adjust its production processes, resources, and strategies to respond to a change in price.

Question 3

Which of the following statements apply as the elasticity of supply approaches infinity
A)Very small changes in price will lead to very large changes in quantity supplied.
B)Very large changes in price will lead to very small changes in quantity supplied.
C)Very small changes in price will lead to no change in quantity supplied.
D)Very large changes in price will lead to no change in quantity supplied.

Accepted Answer

When the elasticity of supply approaches infinity, it means that the quantity supplied is infinitely responsive to small changes in price. This implies that even a small change in price will lead to a very large change in quantity supplied. Hence, option A is the correct answer.

Question 4

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.70,the bakery would be willing to supply 900.Using the midpoint method,what is the elasticity of supply for bagels
A)0.58
B)0.77
C)1.24
D)1.71

Accepted Answer

The answer of A bakery would be willing to supply...

Question 5

Why do some firms experience elastic supply curves at low levels of quantity supplied and more inelastic supply curves at higher levels of quantity supplied
A)At lower levels of quantity supplied, these firms have idle capacity.
B)At higher levels of quantity supplied, these firms incur lower production costs.
C)At lower levels of quantity supplied, these firms incur higher production costs.
D)At higher levels of quantity supplied, these firms have idle capacity.

Accepted Answer

At lower levels of quantity supplied, firms often have idle capacity, allowing them to increase production without significant increases in cost, leading to more elastic supply. As production increases and capacity is utilized, it becomes harder to increase supply, making it more inelastic.

Question 6

What properties does a linear supply curve have
A)a constant slope and changing elasticity of supply
B)a changing slope and a constant elasticity of supply
C)both a constant slope and a constant elasticity of supply
D)both a changing slope and a changing elasticity of supply

Accepted Answer

A linear supply curve has a constant slope because it is a straight line, but the elasticity of supply changes along the curve as the price and quantity change.

Question 7

If the elasticity of supply of a product is 2.2,what do we know about supply
A)It is inelastic.
B)It is elastic.
C)It is unit elastic.
D)It is perfectly inelastic.

Accepted Answer

The elasticity of supply being greater than 1 (in this case, 2.2) indicates that supply is elastic, which means that a change in price will result in a proportionally larger change in quantity supplied.

Question 8

When the price elasticity of demand is perfectly inelastic,what can be said about the elasticity and the demand curve
A)The elasticity is 0 and the demand curve is vertical.
B)The elasticity is 0 and the demand curve is horizontal.
C)The elasticity approaches infinity and the demand curve is vertical.
D)The elasticity approaches infinity and the demand curve is horizontal.

Accepted Answer

When the price elasticity of demand is perfectly inelastic, it means that the quantity demanded does not change at all when the price changes. This implies that the elasticity is 0, as there is no percentage change in quantity demanded for any percentage change in price. This also means that the demand curve is perfectly vertical, as the price can change without affecting the quantity demanded.

Question 9

If soybean farmers know that the demand for soybeans is inelastic,and they want to increase their total revenue,what should they all do
A)They should plant more soybeans so that they would be able to sell more each year.
B)They should increase spending on fertilizer in an attempt to produce more on the acres they farm.
C)They should reduce the number of acres they plant in soybeans.
D)They should use better machinery.

Accepted Answer

Since the demand for soybeans is inelastic, increasing the quantity supplied by planting more soybeans would result in a decrease in the price of soybeans, leading to a decrease in revenue. Similarly, increasing spending on fertilizer or using better machinery would increase the cost of production, resulting in a decrease in revenue. Hence, the best option for soybean farmers to increase their total revenue is to reduce the number of acres they plant in soybeans, which would lead to a decrease in the supply of soybeans, causing an increase in price and total revenue.

Question 10

Why could the discovery of a new hybrid wheat lower farmers' revenue
A)because the demand for wheat is inelastic
B)because the demand for wheat is elastic
C)because the supply of wheat is elastic
D)because the supply of wheat is inelastic

Accepted Answer

The answer of Why could the discovery of a new...

Question 11

If the quantity supplied is the same regardless of price,what would the supply curve be
A)unit elastic
B)perfectly elastic
C)perfectly inelastic
D)inelastic

Accepted Answer

If the quantity supplied remains constant or unchanged, regardless of the changes in price, then the supply curve will be perfectly inelastic. This can happen in situations where the production capacity of the suppliers is limited, or the raw materials required for the production are available in fixed quantities only. As a result, the suppliers cannot increase their output or supply even if the market price rises, and hence the supply remains the same. In such cases, the supply curve will be a vertical straight line, indicating a zero elasticity of supply.

Question 12

Which of the following statements applies to a perfectly elastic supply curve
A)The elasticity of supply is 1.
B)The supply curve is vertical.
C)Very small changes in price lead to large changes in quantity supplied.
D)The firm would likely be operating in the short run.

Accepted Answer

A perfectly elastic supply curve means that any small change in price results in an infinite change in quantity supplied, represented by a horizontal line.

Question 13

Knowing that the demand for wheat is inelastic,if all farmers voluntarily cut back 10 percent of their wheat crop,what would happen
A)Consumers of wheat would buy more wheat.
B)Wheat farmers would suffer a reduction in their revenue.
C)Wheat farmers would increase their revenue.
D)The demand for wheat would decrease.

Accepted Answer

When demand is inelastic, a decrease in supply leads to an increase in price that is proportionally larger than the decrease in quantity, resulting in higher total revenue for farmers.

Question 14

When will a decrease in supply cause the largest increase in price
A)when both supply and demand are inelastic
B)when both supply and demand are elastic
C)when demand is elastic and supply is inelastic
D)when demand is inelastic and supply is elastic

Accepted Answer

When both supply and demand are inelastic, a decrease in supply will cause a large increase in price because consumers are not sensitive to price changes (inelastic demand) and producers cannot easily increase supply (inelastic supply).

Question 15

As elasticity rises,what happens to the supply curve
A)It gets flatter.
B)It gets steeper.
C)It becomes vertical.
D)It becomes downward sloping.

Accepted Answer

As elasticity increases, producers are more sensitive to changes in price, and are more likely to increase or decrease supply as a response. This means that the supply curve becomes flatter, as relatively small changes in price lead to larger changes in quantity supplied.

Question 16

Because the demand for wheat tends to be inelastic,what would the development of a new,more productive hybrid wheat tend to do
A)increase the total revenue of wheat farmers
B)decrease the total revenue of wheat farmers
C)weaken the demand for wheat
D)weaken the supply of wheat

Accepted Answer

When demand is inelastic, an increase in supply (due to more productive wheat) leads to a lower price and a decrease in total revenue for farmers, as the percentage drop in price outweighs the percentage increase in quantity sold.

Question 17

What are the most basic tools of economics
A)demand and supply
B)price and quantity
C)price floors and price ceilings
D)elasticity of demand and supply

Accepted Answer

The answer of What are the most basic tools of...

Question 18

The discovery of a new hybrid wheat would tend to increase the supply of wheat.Under what conditions would wheat farmers realize an increase in revenue
A)if the supply of wheat is elastic
B)if the supply of wheat is inelastic
C)if the demand for wheat is inelastic
D)if the demand for wheat is elastic

Accepted Answer

The answer of The discovery of a new hybrid wheat...

Question 19

Table 5-3
 
-Refer to Table 5-3.Which supply curve would represent the most inelastic supply
A)supply curve A
B)supply curve B
C)supply curve C
D)supply curve D

Accepted Answer

The answer of Table 5-3
 
-Refer to Table 5-3.Which supply...

Question 20

Which of the following situations will occur,given a vertical supply curve
A)Suppliers will not respond to a change in price.
B)An infinite quantity will be supplied at a given price.
C)Suppliers will refuse to sell the product at the current market price.
D)If the price of the product increases, quantity supplied will increase substantially.

Accepted Answer

A vertical supply curve indicates that the quantity supplied is fixed and does not change with price, meaning suppliers do not respond to price changes.

Quiz 5: Elasticity and Its Application

What does the elasticity of a perfectly elastic supply curve equal

Generally,over which time period will a firm be able to respond most to a change in price

Which of the following statements apply as the elasticity of supply approaches infinity

A bakery would be willing to supply 500 bagels per day at a price of $0.50 each.At a price of $0.70,the bakery would be willing to supply 900.Using the midpoint method,what is the elasticity of supply for bagels

Why do some firms experience elastic supply curves at low levels of quantity supplied and more inelastic supply curves at higher levels of quantity supplied

What properties does a linear supply curve have

If the elasticity of supply of a product is 2.2,what do we know about supply

When the price elasticity of demand is perfectly inelastic,what can be said about the elasticity and the demand curve

If soybean farmers know that the demand for soybeans is inelastic,and they want to increase their total revenue,what should they all do

Why could the discovery of a new hybrid wheat lower farmers' revenue

If the quantity supplied is the same regardless of price,what would the supply curve be

Which of the following statements applies to a perfectly elastic supply curve

Knowing that the demand for wheat is inelastic,if all farmers voluntarily cut back 10 percent of their wheat crop,what would happen

When will a decrease in supply cause the largest increase in price

As elasticity rises,what happens to the supply curve

Because the demand for wheat tends to be inelastic,what would the development of a new,more productive hybrid wheat tend to do

What are the most basic tools of economics

The discovery of a new hybrid wheat would tend to increase the supply of wheat.Under what conditions would wheat farmers realize an increase in revenue

Table 5-3 -Refer to Table 5-3.Which supply curve would represent the most inelastic supply

Which of the following situations will occur,given a vertical supply curve