Suppose That the Price Elasticity of Supply Is One and the Quantity

question 170

Multiple Choice

Suppose that the price elasticity of supply is one and the quantity supplied increases by 5%. Other things being equal, the percentage change in the price should be

• A) a 0.5% increase in the price.
• B) a 5% increase in the price.
• C) a 0.2% increase in the price.
• D) a 2% increase in the price.

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Definitions:

Sustainable Earnings

The portion of a company's profits considered to be repeatable, stable, and able to be maintained over the long term.

P/E Ratio

A valuation metric that compares a company's stock price to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.

Present Value

The computed present value of a future monetary sum or cash flow sequence, utilizing an established rate of return.

Growth Opportunities

Potential scenarios or plans a business can embark on to increase profits, expand its operations, or enter new markets.