A Price Elasticity of Supply of 1

question 114

Multiple Choice

A price elasticity of supply of 1.5 implies that

• A)a 20 percent increase in the quantity supplied increases the price by 30 percent.
• B)total revenue is 1.5 times total cost.
• C)a 20 percent increase in the price increases the quantity supplied by 30 percent.
• D)a 20-unit increase in supply reduces the price by $30.
• E)a $20 increase in the price increases the quantity supplied by 30 units.

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Definitions:

Transportation Costs

Expenses incurred in moving goods and services from one location to another, significantly impacting trade and the final price of products.

North American Free Trade Agreement

A trilateral trade bloc in North America created by Canada, Mexico, and the United States to reduce trading costs, increase business investment, and help North America be more competitive in the global marketplace.

General Agreement on Tariffs and Trade

An international treaty created to reduce trade barriers and promote international commerce through the reduction of tariffs and quotas.

Free Trade

Cross-border commerce without the imposition of tariffs, quotas, or any restrictions, allowed to unfold naturally.