In the mid-1980s, the salaries of accounting professors with Ph.D.s increased dramatically. This resulted in an increase in enrollments in Ph.D. accounting programs. Since a Ph.D. degree in accounting may take at least four years to complete, the short-run elasticity of supply of accounting professors is A) greater than the long-run-elasticity of supply. B) less […]
Suppliers with a high supply elasticity will bear a ________ tax incidence, while suppliers with a low supply elasticity will bear a ________ tax incidence. A) lower; higher B) higher; lower C) lower or no; higher or full D) A and C ANSWER D
When comparing elasticities between two different linear demand curves, the curve that is flatter has greater price elasticity at every given price. Indicate whether the statement is true or false ANSWER False. This statement confuses slope with elasticity. Elasticity is calculated by multiplying the slope times (p/Q). As a result, the vertical intercept (along […]
In the late 1980s, the health benefits of oat bran were widely advertised. If the price of oats increased 50%, causing the quantity of oats supplied to increase by 40%, then the price elasticity of supply was A) 1.25. B) -1.25. C) -0.80. D) 0.80. ANSWER D
The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear. What will be an ideal response? ANSWER Elasticity = slope (p/Q), -0.2 = slope (3/2). The slope […]
An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds. As a result, farmers face the largest crop harvest in decades. Which answer below explains how a farm could actually go bankrupt under this scenario. A) The elasticity of supply for corn […]
The percentage change in the quantity supplied in response to a percentage change in the price is known as the A) slope of the supply curve. B) excess supply. C) price elasticity of supply. D) All of the above. ANSWER C
Because demand curves slope downward according to the Law of Demand, the price elasticity of demand is a negative number. Indicate whether the statement is true or false ANSWER True . The price elasticity of demand measures the change in quantity demanded when a price change occurs. If price increases, the change in the […]
Which good would you expect to have a greater price elasticity: a gallon of gasoline sold at a specific gasoline station on Main Street in Phoenix, a gallon of gasoline sold in Phoenix, or a gallon of gasoline sold in Arizona? Why? What will be an ideal response? ANSWER A gallon of gasoline sold […]
Explain why when the demand curve for a good is elastic, a one percent reduction in the price of the good will increase a consumer’s expenditure on the good. What will be an ideal response? ANSWER When a good has an elastic demand, a one percent decrease in the price will result in a […]
