A tax accounting firm produces 500 tax returns units when the market price is $150 per return and produces 700 tax returns when the market price is $170 per tax return.Using the midpoint method,for this range of prices,the price elasticity of supply is about
A)2.67.
B)0.67.
C)0.4.
D)0.125.

Question

Quizplus · Accepted Answer

The midpoint method for calculating price elasticity of supply is:(Q2 - Q1) / ((Q2 + Q1) / 2) / (P2 - P1) / ((P2 + P1) / 2)Plugging in the values given in the question, we get:(700 - 500) / ((700 + 500) / 2) / (170 - 150) / ((170 + 150) / 2)= 200 / 600 / 20 / 160= 2.67Therefore, the price elasticity of supply for this range of prices is about 2.67.

A Tax Accounting Firm Produces 500 Tax Returns Units When