Suppose the Price Elasticity of Supply for Cheese Is 0

question 9

Multiple Choice

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15 percent, then the quantity supplied of cheese will increase by

• A)0.4 percent in the short run and 4.6 percent in the long run.
• B)1.7 percent in the short run and 0.7 percent in the long run.
• C)9 percent in the short run and 21 percent in the long run.
• D)25 percent in the short run and 10.7 percent in the long run.

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Definitions:

Short-Term Assets

Assets that will be converted into cash within one year.

Prepaid Expenses

Payments made for goods or services to be received in the future, recognized as assets on a balance sheet until they are incurred as expenses.

Inventory

The quantity of goods and materials a business holds for the purpose of resale or production.

Short-Term Assets

Assets expected to be converted into cash, sold, or consumed within one year or within the operating cycle of a business, whichever is longer.