358 ? Chapter 5 /Elasticity and Its Application

Table 5-6 Price Quantity Supplied Supply Curve A $1.00 $2.00 500 600 Supply Curve B $1.00 $3.00 600 900 Supply Curve C $2.00 $5.00 400 700 44. Refer to Table 5-6. 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.

ANS: A

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

45. Refer to Table 5-6. 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.

ANS: C

NAT: Analytic MSC: Applicative

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

46. Refer to Table 5-6. 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. Quantity supplied moves proportionately more than the price along none of the three supply curves.

ANS: D

NAT: Analytic MSC: Applicative

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

47. 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 a. 0.45 b. 0.90 c. 1.11 d. 2.20

ANS: D

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

48. 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 a. 0.15 b. 0.375 c. 2.5 d. 2.60

ANS: D

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

Chapter 5 /Elasticity and Its Application ? 359

49. 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.

ANS: D

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

50. 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.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

51. 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

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

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

production from 40 to 50 boxes when price increases by 20 percent, 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

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

53. 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. 0.67 b. 0.89 c. 1.00 d. 1.13

ANS: B

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

360 ? Chapter 5 /Elasticity and Its Application

54. 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

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

55. 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 price elasticity of supply for bagels is a. 0.62. b. 0.77. c. 1.24. d. 1.63.

ANS: D

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

56. 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 price elasticity of supply for bagels is

a. 0.62, and supply is elastic. b. 0.62, and supply is inelastic. c. 1.63, and supply is elastic. d. 1.63, and supply is inelastic.

ANS: C

NAT: Analytic MSC: Analytical

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

57. 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

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

Chapter 5 /Elasticity and Its Application ? 361

58. In January the price of widgets was $1.00, and Wendy's Widgets produced 80 widgets. In February the price

of widgets was $1.50, and Wendy's Widgets produced 110 widgets. In March the price of widgets was $2.00, and Wendy's Widgets produced 140 widgets. The price elasticity of supply of Wendy's Widgets was a. 0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to

$2.00.

b. 1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to

$2.00.

c. 0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to

$2.00.

d. 1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to

$2.00.

ANS: A

NAT: Analytic MSC: Analytical

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Midpoint method | Price elasticity of supply

59. Which of the following statements is valid when the market supply curve is vertical?

a. Market quantity supplied does not change when the price changes. b. Supply is perfectly elastic.

c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will not increase the equilibrium price.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly inelastic supply

60. Which of the following statements is not valid when the market supply curve is vertical?

a. Market quantity supplied does not change when the price changes. b. Supply is perfectly inelastic.

c. An increase in market demand will increase the equilibrium quantity. d. An increase in market demand will increase the equilibrium price.

ANS: C

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly inelastic supply

61. Which of the following statements is valid when supply is perfectly elastic at a price of $4?

a. The elasticity of supply approaches infinity. b. The supply curve is vertical.

c. At a price below $4, quantity supplied is infinite. d. At a price above $4, quantity supplied is zero.

ANS: A

NAT: Analytic KEY: Interpretive

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Perfectly elastic supply

62. Which of the following statements is not valid when supply is perfectly elastic?

a. The elasticity of supply approaches infinity. b. The supply curve is horizontal.

c. Very small changes in price lead to large changes in quantity supplied.

d. The time period under consideration is more likely a short period rather than a long period.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 3

LOC: Elasticity

REF: 5-2

TOP: Perfectly elastic supply

63. If the quantity supplied is the same regardless of price, then supply is

a. elastic.

b. perfectly elastic. c. perfectly inelastic. d. inelastic.

ANS: C

NAT: Analytic MSC: Definitional

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly inelastic supply

362 ? Chapter 5 /Elasticity and Its Application

64. When supply is perfectly elastic, the value of the price elasticity of supply is

a. 0. b. 1.

c. greater than 0 and less than 1. d. infinity.

ANS: D

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly elastic supply

65. Which of the following would be true as the price elasticity of supply approaches infinity?

a. Very small changes in price lead to very large changes in quantity supplied. b. Very large changes in price lead to very small changes in quantity supplied. c. Very small changes in price lead to no change in quantity supplied. d. Very large changes in price lead to no change in quantity supplied.

ANS: A

NAT: Analytic MSC: InterpretiveFigure 5-16

PriceDIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly elastic supply

S1S2P1S3Q1Quantity66. Refer to Figure 5-16. Which supply curve represents perfectly inelastic supply?

a. S1 b. S2 c. S3

d. None of the supply curves is perfectly inelastic.

ANS: A

NAT: Analytic MSC: Interpretive

DIF: 1

LOC: Elasticity

REF: 5-2

TOP: Perfectly inelastic supply

67. Refer to Figure 5-16. 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

NAT: Analytic MSC: Interpretive

DIF: 2

LOC: Elasticity

REF: 5-2

TOP: Perfectly elastic supply