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Price Elasticity of Supply quiz #1 Flashcards

Price Elasticity of Supply quiz #1
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  • Which of the following best describes the influence of high prices on the behavior of producers?
    High prices encourage producers to increase the quantity supplied, as higher prices make production more profitable.
  • How do increases in gasoline prices affect the average variable cost (AVC) for producers?
    Increases in gasoline prices raise the average variable cost (AVC) for producers, making production more expensive.
  • How does the quantity supplied of a good with a large elasticity of supply react to a price change?
    For goods with large elasticity of supply, the quantity supplied is very responsive and changes significantly when the price changes.
  • If the price of oranges is $2.00 per orange, how many oranges will be supplied per week?
    The quantity supplied per week at $2.00 per orange depends on the supply schedule, which is not provided, so the exact number cannot be determined without additional information.
  • What is a key determinant of the price elasticity of supply?
    A key determinant of the price elasticity of supply is the time period producers have to adjust their production.
  • The longer the time period considered, how does the elasticity of supply tend to change?
    The longer the time period considered, the more elastic the supply tends to become, as producers have more time to adjust.
  • If costs of production rise, the producer has an incentive to produce (one word) output.
    less
  • If the supply curve for a product is horizontal, then the elasticity of supply is:
    Infinite; a horizontal supply curve indicates perfectly elastic supply.
  • Supply is said to be ____________ when the quantity supplied is very responsive to changes in price.
    elastic
  • The supply of product X is elastic if the price of X rises by 10% and the quantity supplied increases by more than 10%.
    True; supply is elastic if the percentage change in quantity supplied is greater than the percentage change in price.
  • The elasticity of supply of product X is unitary if the price of X rises by 10% and the quantity supplied increases by exactly 10%.
    True; supply is unit elastic if the percentage change in quantity supplied equals the percentage change in price.