Question 1

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.

Accepted Answer

In the short run, the price elasticity of supply (PES) is 0.3, which means that the quantity supplied of soccer balls will increase by 6% (20% increase in price divided by 0.3) in the short run.

In the long run, the PES is 1.2, which means that the quantity supplied of soccer balls will increase by 24% (20% increase in price divided by 1.2) in the long run.

Therefore, the correct answer is C, 6% in the short run and 24% in the long run.

Question 2

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.

Accepted Answer

We can use the formula for percentage change in quantity supplied:
%ΔQs = %ΔP x elasticity of supply

For the short run:
%ΔQs (short run) = 0.15 x 0.6 = 0.09 or 9%

For the long run:
%ΔQs (long run) = 0.15 x 1.4 = 0.21 or 21%

Therefore, the correct answer is C) 9% in the short run and 21% in the long run.

Question 3

Table 5-9 
-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.

Accepted Answer

The answer of Table 5-9 
-Refer to Table 5-9. Along...

Question 4

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

Accepted Answer

The answer of At a price of $1.00, a local...

Question 5

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.

Accepted Answer

The midpoint method calculates elasticity as the percentage change in quantity divided by the percentage change in price. Here, the percentage change in quantity is (250-200)/225 = 0.222, and the percentage change in price is (2.50-2.00)/2.25 = 0.222. Thus, the elasticity is 0.222/0.222 = 1.0.

Question 6

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.

Accepted Answer

The answer of Suppose the price elasticity of supply for...

Question 7

Table 5-9 
-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.

Accepted Answer

Supply curve C is the most elastic because it has a flatter slope, meaning that a small change in price leads to a proportionally larger change in quantity supplied. This indicates that producers are more responsive to changes in price, making their supply more elastic.

Question 8

Table 5-9 
-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.

Accepted Answer

Supply curve A represents the least elastic supply, as it has a steeper slope and smaller change in quantity supplied in response to a change in price, compared to supply curves B and C.

Question 9

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.

Accepted Answer

The answer of On a certain supply curve, one point...

Question 10

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

Accepted Answer

Using the midpoint method formula for price elasticity of supply:

% change in quantity supplied = (new quantity - old quantity) / (average quantity) * 100%
% change in price = (new price - old price) / (average price) * 100%

Average quantity = (1.2 + 1.6) / 2 = 1.4 million pounds
% change in quantity supplied = (1.6 - 1.2) / (1.4) * 100% = 28.57%

Average price = (1.3 + 1.8) / 2 = 1.55 dollars per pound
% change in price = (1.8 - 1.3) / (1.55) * 100% = 32.26%

Using the formula for price elasticity of supply:
Elasticity = % change in quantity supplied / % change in price
Elasticity = 28.57% / 32.26% = 0.885

Rounding to two decimal places, the approximate value of the price elasticity of supply is 0.89. Therefore, the best choice is B.

Question 11

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) 2.5
C) 0.375
D) 2.60

Accepted Answer

The answer of At a price of $1.20, a local...

Question 12

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.

Accepted Answer

The answer of In which of the following situations would...

Question 13

Table 5-10 
-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.

Accepted Answer

The answer of Table 5-10 
-Refer to Table 5-10. Using...

Question 14

Table 5-10 
-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.

Accepted Answer

Using the midpoint method, we can calculate the price elasticities of supply as follows:
- For supply curve X: ((150 - 100) / ((150 + 100) / 2)) / ((20 - 10) / ((20 + 10) / 2)) = 1.2
- For supply curve Y: ((200 - 150) / ((200 + 150) / 2)) / ((30 - 20) / ((30 + 20) / 2)) = 1.33
- For supply curve Z: ((250 - 200) / ((250 + 200) / 2)) / ((40 - 30) / ((40 + 30) / 2)) = 1.5

The higher the elasticity, the more elastic the supply curve is, and vice versa. Therefore, supply curve Z has the most inelastic price elasticity of supply (the smallest elasticity) because it has the highest numeric value, indicating that it is less responsive to changes in price.

Question 15

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%.
-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.

Accepted Answer

The supply of aged cheddar cheese is inelastic, meaning its price elasticity of supply is less than 1. A value of 0.5 indicates inelastic supply, as it is positive and less than 1.

Question 16

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.

Accepted Answer

The answer of Holding all other factors constant and using...

Question 17

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.

Accepted Answer

The answer of Holding all other factors constant and using...

Question 18

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.

Accepted Answer

Using the midpoint method, we can calculate the price elasticity of supply as follows:

% change in quantity supplied = (change in quantity supplied / midpoint quantity) x 100%
% change in price = (change in price / midpoint price) x 100%

Midpoint quantity = (400 + 600) / 2 = 500
Midpoint price = ($10 + $12) / 2 = $11

% change in quantity supplied = (600 - 400) / 500 x 100% = 40%
% change in price = ($12 - $10) / $11 x 100% = 18.18%

Price elasticity of supply = % change in quantity supplied / % change in price
Price elasticity of supply = 40% / 18.18% = 2.2

Therefore, the price elasticity of supply is about 2.2.

Question 19

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%.
-Refer to Scenario 5-3. The price elasticity of supply for bread could be
A) -1.
B) 0.
C) 0.5.
D) 1.5.

Accepted Answer

The supply of bread is elastic, which means the price elasticity of supply is greater than 1. Therefore, 1.5 is a plausible value for the price elasticity of supply for bread.

Question 20

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.

Accepted Answer

The price elasticity of supply measures the responsiveness of quantity supplied to a change in price. A value of 1.5 indicates that supply is relatively elastic, meaning that a 10% increase in price would result in a 15% increase in quantity supplied. Option B is incorrect because elastic supply indicates responsiveness to changes in price. Option C is not necessarily true and not related to the price elasticity of supply.

Quiz 5: Elasticity and Its Application

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

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

Table 5-9 -Refer to Table 5-9. Along which of the supply curves does quantity supplied move proportionately more than the price?

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

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

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

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

Table 5-9 -Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

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

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?

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

In which of the following situations would supply be the most elastic?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most elastic price elasticity of supply?

Table 5-10 -Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

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

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 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

If the price elasticity of supply for a window manufacturer is 1.5,