Question

25) What is measured by the price elasticity of supply?

A) The price elasticity of supply measures how responsive producers are to changes in the price of other goods. B) The price elasticity of supply measures how responsive producers are to changes in income.

C) The price elasticity of supply measures how responsive producers are to changes in the price of a product. D) The price elasticity of supply is a measure of the slope of the supply curve.

E) The price elasticity of supply measures how responsive producers are to changes in the cost of producing a

product.

26) If the price of a scooter increases by 20 percent and the quantity supplied of scooters increases by 30 percent, then

supply is

A) elastic and the elasticity of supply equals 1.5.

B) inelastic and the elasticity of supply equals 1.5.

C) elastic and the elasticity of supply equals 0.66.

D) inelastic and the elasticity of supply equals 0.66.

E) either elastic or inelastic but more information about the elasticity of demand is needed to determine which.

27) Suppose the current price of barley is $7 per bushel and at that price 100,000 bushels are grown by a Colorado farmer. If the price of barley rises to $8 and quantity supplied increases to 130,000 bushels, then using the midpoint method, the price elasticity of supply for barley equals

A) 13.33. B) 26.78. C) 1.96. D) 0.51. E) Zero.

28) Suppose an increase in demand causes the price to increase from $2 to $4 and the quantity to increase from 1,000 to 1,800. Using the midpoint method, the elasticity of supply equals

A) 0.86.

B) 1.17.

C) 2.74.

D) 0.68

E) None of the above answers is correct.

29) If the price doubles and the quantity supplied also doubles, the price elasticity of supply for the good is A) -1.

B) 1.

C) -2.

D) 2.

E) 100 percent.

30) If the price elasticity of supply for a good is 0.75, then

A) the percentage change in the quantity supplied is less than the percentage change in price. B) the supply is elastic.

C) an increase in the price boosts the quantity supplied by a larger percentage.

D) the supply is inelastic so the demand must also be inelastic.

E) None of the above answers is correct.

31) If the percentage change in the price of a good exceeds the percentage change in the quantity supplied, then the supply

is

A) elastic.

B) inelastic. C) unit elastic.

D) perfectly elastic. E) perfectly inelastic.

33) When the percentage change in the quantity supplied equals the percentage change in price, the supply is

A) elastic.

B) inelastic.

C) unit elastic.

D) perfectly elastic. E) perfectly inelastic.

34) When the percentage change in the quantity supplied is less than the percentage change in price, the supply is

A) elastic.

B) inelastic.

C) unit elastic.

D) perfectly unit elastic. E) perfectly elastic.

36) What is the formula for the cross elasticity of demand? The percentage change in the

A) quantity demanded divided by the percentage change in the price of a substitute or complement. B) quantity supplied divided by the percentage change in price.

C) quantity demanded divided by the percentage change in price.

D) quantity demanded divided by the percentage change in income.

E) equilibrium quantity demanded divided by the equilibrium quantity supplied.

37) If a 1 percent increase in the price of X increases the quantity demanded of Y by 2 percent, then X and Y are

A) complements and the cross elasticity of demand equals 2.

B) substitutes and the cross elasticity of demand equals 1/2.

C) substitutes and the cross elasticity of demand equals 2.

D) complements and the income elasticity of demand equals 2.

E) normal goods and the income elasticity of demand of each equals 2.

Answer 1

25.

C

It measures % change in supply of a product, with a % change in Price of that product.

26.

A

Elasticity of supply = 30/20 = 1.5

So, the elasticity of supply is elastic.

27.

C

Working note:

E = ((130000-100000)/(130000+100000)/2)/((8-7)/(8+7)/2)

E = 1.96

28.

A

Working note:

E = ((1800-1000)/(1800+1000)/2)/((4-2)/(4+2)/2)

E = .86

29.

B

It is a case of unitary elastic supply.

30.

A

It is a case of inelastic supply.