An Increase in the Price of Cheese Crackers from $2

question 52

Multiple Choice

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute.Using the midpoint method,supply is

• A)elastic,and the price elasticity of supply is 1.74.
• B)elastic,and the price elasticity of supply is 0.57.
• C)inelastic,and the price elasticity of supply is 1.74.
• D)inelastic,and the price elasticity of supply is 0.57.

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Definitions:

Increasing Returns

A situation in economics where an increase in the amount of inputs leads to a greater proportional increase in the amount of output.

Factor Endowments

The amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing and service provision.

Technology

The technical means for producing goods and services.

Heckscher-Ohlin Model

An economic theory that proposes countries will export products that utilize their abundant and cheap factors of production and import goods that require resources that are rare or expensive domestically.