Suppose the Price Elasticity of Supply for Cheese Is 0

question 16

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%,then the quantity supplied of cheese will increase by

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

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Definitions:

Market Price

The actual selling price of a good or service in the marketplace at which buyers and sellers conduct transactions.

Total Revenue

The total income a firm receives from the sales of its products or services before any expenses are subtracted.

Economic Profit

The difference between a firm's total revenue and its opportunity costs, including both explicit and implicit costs.

Profit-maximizing

The process or strategy aiming to achieve the highest possible profit from business operations, often involving adjusting prices, output, and costs.