In January the Price of Widgets Was $1

question 12

Multiple Choice

In January the price of widgets was $1.00,and Wendy's Widgets produced 80 widgets.In February the price of widgets was $1.50,and Wendy's Widgets produced 110 widgets.In March the price of widgets was $2.00,and Wendy's Widgets produced 140 widgets.The price elasticity of supply of Wendy's Widgets was about

• A)0.79 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.
• B)1.27 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
• C)0.79 when the price increased from $1.00 to $1.50 and 1.19 when the price increased from $1.50 to $2.00.
• D)1.27 when the price increased from $1.00 to $1.50 and 0.84 when the price increased from $1.50 to $2.00.

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Definitions:

Rights Offering

A method by which a company raises capital by giving existing shareholders the right to buy additional shares at a discount to the market price before offering them to the public.

General Cash Offer

A public offering of securities to all investors by a company, which involves selling securities directly to the general public to raise capital.

Underpriced

Refers to a situation where an asset is selling for less than its perceived or actual value.

IPOs

The process through which a private company offers shares to the public in a new stock issuance, allowing it to raise capital from public investors.