Suppose the Price Elasticity of Supply for Minivans Is 0

question 8

Multiple Choice

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run.If an increase in the demand for minivans causes the price of minivans to increase by 5%,then the quantity supplied of minivans will increase by about

• A)1.5% in the short run and 6% in the long run.
• B)6% in the short run and 1.5% in the long run.
• C)16.7% in the short run and 4.2% in the long run.
• D)4.2% in the short run and 16.7% in the long run.

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Definitions:

Price-fixing

An illegal agreement among competitors to set prices at a certain level, preventing competition and harming consumers.

Industrial Regulation

Policies and laws enforced by government agencies to regulate industries in order to promote fair competition and protect consumers.

Antitrust Policy

Government regulations designed to promote competition and prevent monopolies, mergers, or cartels that harm consumers.

Single-seller Monopoly

A market structure in which only one producer or seller exists for a product that has no close substitutes, giving them significant market power.