Chapter 5/Elasticity and Its Applications ? 201

189. Frequently, in the short run, the quantity supplied of a good is

a. impossible, or nearly impossible, to measure. b. not very responsive to price changes.

c. determined by the quantity demanded of the good.

d. determined by psychological forces and other non-economic forces. ANS: B PTS: 1 DIF: 2 REF: 5-2 TOP: Short run | Quantity supplied MSC: Interpretive

190. Holding all other factors constant and using the midpoint method, if a pencil manufacturer increases production by

20 percent when the market price of pencils 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. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 191. If the quantity supplied responds only slightly to changes in price, then

a. supply is said to be elastic. b. supply is said to be inelastic.

c. an increase in price will not shift the supply curve very much.

d. even a large decrease in demand will change the equilibrium price only slightly. ANS: B PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Interpretive

192. A key determinant of the price elasticity of supply is

a. the length of the time period. b. the definition of the market.

c. the number of close substitutes for the good in question.

d. the extent to which buyers alter their quantities demanded in response to changes in their incomes. ANS: A PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Interpretive 193. The supply of a good will be more elastic, the

a. more the good is considered a luxury.

b. broader is the definition of the market for the good. c. larger the number of close substitutes for the good. d. longer the time period being considered. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Interpretive

202 ? Chapter 5/Elasticity and Its Applications

Figure 5-10 194. Refer to Figure 5-10. The price elasticity of supply between point A and point B, using the midpoint method, is

approximately a. 0.58. b. 0.71. c. 1.06. d. 1.4. ANS: B PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 195. Refer to Figure 5-10. The price elasticity of supply between point B and point C, using the midpoint method, is

approximately a. 1.44. b. 1.29. c. 0.96. d. 0.78. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 196. Refer to Figure 5-10. If, holding the supply curve fixed, there were an increase in demand that caused the

equilibrium price to increase from $6 to $8, then sellers’ total revenue would a. increase. b. decrease.

c. remain unchanged.

d. The effect on total revenue cannot be determined from the given information. ANS: A PTS: 1 DIF: 2 REF: 5-2 TOP: Total revenue MSC: Applicative

Chapter 5/Elasticity and Its Applications ? 203

Figure 5-11 197. Refer to Figure 5-11. Which supply curve represents perfectly inelastic supply?

a. S1 b. S2 c. S3

d. It is impossible to tell without more information. ANS: A PTS: 1 DIF: 1 REF: 5-2 TOP: Perfectly inelastic supply MSC: Interpretive

198. Refer to Figure 5-11. Which supply curve is most likely relevant over a very long period of time?

a. S1 b. S2 c. S3

d. All of the above are equally likely to be relevant over a very long period of time. ANS: C PTS: 1 DIF: 2 REF: 5-2 TOP: Perfectly elastic supply MSC: Interpretive

199. Suppose that an increase in the price of carrots from $1.30 to $1.80 per pound increases the quantity of carrots that

carrot 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. -1.04 b. 0.67 c. 0.89 d. 1.13 ANS: C PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 200. An increase in the price of pure chocolate morsels from $2.25 to $2.45 causes suppliers of chocolate morsels to

increase their quantity supplied from 125 bags per minute to 145 bags per minute. Supply is a. elastic and the price elasticity of supply is 1.74. b. elastic and the price elasticity of supply is 0.57. c. inelastic and the price elasticity of supply is 1.74. d. inelastic and the price elasticity of supply is 0.57. ANS: A PTS: 1 DIF: 3 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative

204 ? Chapter 5/Elasticity and Its Applications

201. If the supply curve for news magazines is an upward-sloping line and goes through the point (quantity supplied = 0,

price = $1.00), then the price elasticity of supply for news magazines is a. less than one. b. greater than one. c. perfectly inelastic.

d. equal to the price elasticity of demand for news magazines. ANS: B PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 202. If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is

a. 0.5 and supply is elastic. b. 0.5 and supply is inelastic. c. 2 and supply is inelastic. d. 2 and supply is elastic. ANS: B PTS: 1 DIF: 3 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 203. A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery

would be willing to supply 1,100 bagels. Using the midpoint method, the elasticity of supply for bagels is about a. 0.62. b. 0.77. c. 1.24. d. 1.63. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 204. In the long run, the quantity supplied of most goods

a. will increase in almost all cases, regardless of what happens to price. b. cannot respond at all to a change in price.

c. can respond to a change in price, but the change is almost always inconsequential. d. can respond substantially to a change in price. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Price elasticity of supply | Long run MSC: Interpretive 205. When a supply curve is relatively flat,

a. sellers are not at all responsive to a change in price.

b. the equilibrium price changes substantially when the demand for the good changes. c. the supply is relatively elastic. d. the supply is relatively inelastic. ANS: C PTS: 1 DIF: 2 REF: 5-2 TOP: Inelastic supply MSC: Interpretive

206. In January the price of widgets was $2.00 and Wendy's Widgets produced 80 widgets. In February the price of

widgets was $2.50 and Wendy's Widgets produced 110 widgets. In March the price of widgets was $3.00 and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was

a. 0.70 when the price increased from $2.00 to $2.50 and 0.76 when the price increased from $2.50 to $3.00. b. 0.88 when the price increased from $2.00 to $2.50 and 1.08 when the price increased from $2.50 to $3.00. c. 1.42 when the price increased from $2.00 to $2.50 and 1.32 when the price increased from $2.50 to $3.00. d. 1.50 when the price increased from $2.00 to $2.50 and 1.18 when the price increased from $2.50 to $3.00. ANS: C PTS: 1 DIF: 3 REF: 5-2 TOP: Price elasticity of supply MSC: Applicative 207. If sellers do not adjust their quantities supplied at all in response to a change in price,

a. advances in technology must be prevalent.

b. the time period under consideration must be very long. c. supply is perfectly elastic. d. supply is perfectly inelastic. ANS: D PTS: 1 DIF: 2 REF: 5-2 TOP: Perfectly inelastic supply MSC: Interpretive