Question 1

Figure 6-6 
-Refer to Figure 6-6.A perfectly inelastic supply curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

A perfectly inelastic supply curve is a vertical line, which is shown in Panel A.

Question 2

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase,quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?
A) 60 percent
B) 15 percent
C) 6.7 percent
D) impossible to determine without additional information

Accepted Answer

Price elasticity of supply = % change in quantity supplied / % change in price
2 = 30% / % change in price
% change in price = 15%

Question 3

The price elasticity of an upward-sloping supply curve is always
A) positive.
B) negative.
C) greater than one.
D) impossible to determine.

Accepted Answer

Price elasticity measures the responsiveness of quantity demanded or supplied to a change in price. Upward-sloping supply curves mean that as the price increases, producers are willing to supply more goods. Therefore, the price elasticity of supply is always positive.

Question 4

Suppose the price elasticity of demand for cigarettes is -0.4.The FDA decides to regulate tobacco production,which increases the price of cigarettes and causes the quantity of cigarettes demanded to decrease by 25 percent.What is the percentage increase in price which would lead to the 25 percent decrease in quantity demanded? If the price elasticity was -4,what would be the percentage increase in price?

Accepted Answer

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

Question 5

The price elasticity of supply is equal to
A) the value of the slope of the supply curve.
B) the change in quantity supplied divided by the change in price.
C) the percentage change in price divided by the percentage change in quantity supplied.
D) the percentage change in quantity supplied divided by the percentage change in price.

Accepted Answer

The price elasticity of supply is defined as the percentage change in quantity supplied divided by the percentage change in price. Therefore, the correct answer is D.

Question 6

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

The answer of The demand for most farm products is...

Question 7

Suppose the value of the price elasticity of supply is 4.What does this mean?
A) A 4 percent increase in the price of the good causes quantity supplied to increase by 1 percent.
B) A 1 percent increase in the price of the good causes the supply curve to shift upward by 4 percent.
C) A 1 percent increase in the price of the good causes quantity supplied to increase by 4 percent.
D) For every $1 increase in price, quantity supplied increases by 4 units.

Accepted Answer

A price elasticity of supply of 4 means that for every 1 percent increase in price, quantity supplied will increase by 4 percent. Therefore, choice C is the correct answer.

Question 8

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximately change in the quantity supplied of teenage labor.
A) 7.3 percent
B) 14.4 percent
C) 25.5 percent
D) There is insufficient information to answer the question.

Accepted Answer

Using the midpoint formula, the percentage change in quantity supplied is calculated as:

%ΔQs = (ΔQs/[(Q1+Q2)/2]) x 100

where ΔQs is the change in quantity supplied, Q1 is the initial quantity supplied, and Q2 is the new quantity supplied.

Given the price elasticity of supply (Es) is 1.36, we know that:

Es = (%ΔQs) / (%ΔP)

Rearranging this equation, we get:

%ΔQs = Es x %ΔP

%ΔP is the percentage change in price, which is (8.75-7.25)/7.25 x 100 = 20.7%

Plugging in the values, we get:

%ΔQs = 1.36 x 20.7% = 28.1%

Therefore, the approximately change in the quantity supplied of teenage labor is 28.1%. Using the midpoint formula, we can also cross-verify this value as:

%ΔQs = (ΔQs/[(Q1+Q2)/2]) x 100
28.1 = (ΔQs/[(Q1+Q2)/2]) x 100
ΔQs = ((Q1+Q2)/2) x 28.1/100

Assuming Q1 = Q2, we get:

ΔQs = Q1 x 28.1/100

This shows that the change in quantity supplied is approximately 28.1% of the initial quantity.

Question 9

Figure 6-6 
-Refer to Figure 6-6.The supply curve on which price elasticity changes at every point is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

The answer of Figure 6-6 
-Refer to Figure 6-6.The supply...

Question 10

Figure 6-7 
-Refer to Figure 6-7.What is the value of the price elasticity of supply between g and h?
A) 20 percent
B) 0.5
C) 2
D) 0.02

Accepted Answer

The price elasticity of supply (PES) between g and h can be calculated as:
PES = percentage change in quantity supplied ÷ percentage change in price
From point g to h, the quantity supplied increases from 30 to 70 (a change of 40) while the price increases from $20 to $40 (a change of 100%). Therefore, the PES can be calculated as:
PES = (40 ÷ 30) ÷ (100 ÷ 20) = 2
So, the correct choice is C, which represents the value of 2.

Question 11

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.
A) 1.22
B) 1.0
C) 0.82
D) 0.07

Accepted Answer

The answer of Suppose that the price of a money...

Question 12

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.
A) 2; The product is elastic.
B) 0.2; The product is inelastic.
C) 0.5; The product is inelastic.
D) 50%; The product is inelastic.

Accepted Answer

Price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price.
In this case, the percentage change in quantity supplied is 2 percent and the percentage change in price is 4 percent. 
So, price elasticity of supply = (2/4) = 0.5
Since the value of price elasticity of supply is less than 1, the product is considered inelastic. Therefore, option C is the correct answer.

Question 13

Figure 6-6 
-Refer to Figure 6-6.A perfectly elastic supply curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

The answer of Figure 6-6 
-Refer to Figure 6-6.A perfectly...

Question 14

Price elasticity of supply is used to gauge
A) how responsive suppliers are to price changes.
B) how responsive suppliers are to changes in future prices.
C) how responsive suppliers are to a change in demand.
D) how responsive sales are to a change in input prices

Accepted Answer

Price elasticity of supply measures the responsiveness of suppliers to changes in price. It shows how much the quantity supplied changes in response to a change in price. If the price elasticity of supply is high, then suppliers are highly responsive to a change in price. If it is low, then suppliers are less responsive to a change in price.

Question 15

An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result,quantity supplied increases by 30 percent.Using the midpoint formula,calculate the value of the price elasticity of supply?
A) 1.35
B) 1.875
C) 2.22
D) 7.5

Accepted Answer

The answer of An increase in the demand for green...

Question 16

If firms do not increase their quantity supplied when price changes,then supply is
A) perfectly elastic.
B) perfectly inelastic.
C) relatively inelastic.
D) elastic.

Accepted Answer

If firms do not increase their quantity supplied when price changes, it means that the quantity supplied remains the same regardless of the change in price. This is characteristic of a perfectly inelastic supply, where the price elasticity of supply is zero.

Question 17

Figure 6-6 
-Refer to Figure 6-6.A unit-elastic supply curve is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.

Accepted Answer

A unit-elastic supply curve is represented by a straight line that passes through the origin, indicating that the percentage change in quantity supplied is equal to the percentage change in price. Panel C typically illustrates this characteristic.

Question 18

A study of the effects of the minimum wage on employment of low-skilled workers estimated the price elasticity of demand for low-skilled workers is -0.75.Suppose that the government is considering raising the minimum wage from $7.25 per hour to $7.75 per hour.Based on this information,calculate the percentage change in the employment of low skilled workers.Use the midpoint formula.

Accepted Answer

The answer of A study of the effects of the...

Question 19

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is
A) unit-elastic.
B) perfectly elastic.
C) relatively inelastic.
D) elastic.

Accepted Answer

If quantity supplied decreases by a proportionately smaller percentage than the decrease in price, then the price elasticity of supply is less than one (Ed<1), meaning it is relatively inelastic.

Question 20

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is
A) unit-elastic.
B) perfectly elastic.
C) relatively inelastic.
D) elastic.

Accepted Answer

When the percentage increase in quantity supplied is greater than the percentage increase in price, then supply is said to be elastic.

Quiz 6: Elasticity: The Responsiveness of Demand and Supply

Figure 6-6 -Refer to Figure 6-6.A perfectly inelastic supply curve is shown in

The price elasticity of supply for umbrellas is 2.Suppose you're told that following a price increase,quantity supplied increased by 30 percent.What was the percentage change in price that brought this about?

The price elasticity of an upward-sloping supply curve is always

The price elasticity of supply is equal to

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Suppose the value of the price elasticity of supply is 4.What does this mean?

The price elasticity of the supply of teenage labor services is approximately 1.36.Suppose the minimum wage rises from $7.25 per hour to $8.75.Using the midpoint formula,calculate the approximately change in the quantity supplied of teenage labor.

Figure 6-6 -Refer to Figure 6-6.The supply curve on which price elasticity changes at every point is shown in

Figure 6-7 -Refer to Figure 6-7.What is the value of the price elasticity of supply between g and h?

Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity supplied rises from 8,000 units to 10,000 units.Use the midpoint formula to calculate the price elasticity of supply.

Suppose a 4 percent increase in price results in a 2 percent increase in the quantity supplied of a good.Calculate the price elasticity of supply and characterize the product.

Figure 6-6 -Refer to Figure 6-6.A perfectly elastic supply curve is shown in

Price elasticity of supply is used to gauge

An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result,quantity supplied increases by 30 percent.Using the midpoint formula,calculate the value of the price elasticity of supply?

If firms do not increase their quantity supplied when price changes,then supply is

Figure 6-6 -Refer to Figure 6-6.A unit-elastic supply curve is shown in

If,for a given percentage decrease in price,quantity supplied decreases by a proportionately smaller percentage,then supply is

If,for a given percentage increase in price,quantity supplied increases by a proportionately larger percentage,then supply is