1.A price floor of 89 cents per bushel of cranberries was recently increased to $1.00 per bushel. Before the increase, the market price of cranberries was 89 cents. What will happen to the market price in the market? The market price will______________. [The next question asks about the quantity sold.]

a.not change

b.increase

c.decrease

d.One cannot tell.

2.Think of the effects of an increase in an inelastic supply. Compare the size of the changes in prices and quantities with the size of those changes with the same increase in an elastic supply. The effects of an increase in an inelastic supply will be:

a.a larger change in equilibrium quantity and a larger change in equilibrium price.

b.a larger change in equilibrium quantity and a smaller change in equilibrium price.

c.a smaller change in equilibrium quantity and a larger change in equilibrium price.

d.a smaller change in equilibrium quantity and a smaller change in equilibrium price.

e.The changes in equilibrium quantity and price will be the same in both cases.

3.A change in supply will cause the equilibrium price to change by______________and the equilibrium quantity to change by______________with an inelastic demand than if demand were elastic.

a.more; more

b.more; less

c.less; less

d.less; more

e.the same amount; the same amount

4.If demand is elastic, should a producer raise or lower price if the producer wants to increase total revenues?

a.The producer should lower prices.

b.The producer should raise prices.

c.It depends upon the elasticity of supply.

d.Neither change will increase revenues.

5.Facing a rising demand for hand sanitizers, a perfume company switches to producing exclusively sanitizers. Suppose the switch is relatively easy for the company. If the price for hand sanitizers went up by 40% and the company were able to increase quantity supplied by 50%, calculate their price elasticity of supply.

6.An increase in the costs of producing a service will cause a(n)______________in the price of a service with an elastic demand than it would in the case of an inelastic demand.

a.greater increase

b.smaller increase

c.greater decrease

d.smaller decrease

e.identical change

7.An inelastic supply increases. Compare the size of the changes in prices and quantities with the size of those changes that would occur the same increase in an elastic supply. The effects of an increase in an inelastic supply will be:

a.a larger change in equilibrium quantity and a larger change in equilibrium price.

b.a larger change in equilibrium quantity and a smaller change in equilibrium price.

c.a smaller change in equilibrium quantity and a larger change in equilibrium price.

d.a smaller change in equilibrium quantity and a smaller change in equilibrium price.

e.The changes in equilibrium quantity and price will be the same in both cases.

8.A price floor holds prices above the equilibrium price. If nothing else changes, there will:

a.always be a surplus

b.always be a shortage

c.sometimes be a surplus

d.sometimes be a shortage

e.There may not be either a surplus or a shortage.

9.A business wants to increase its revenues and it faces an elastic demand, should the firm raise or lower price?

a.The business should lower prices.

b.The business should raise prices.

c.It depends upon the elasticity of supply.

d.Neither change will increase revenues.

e.One cannot tell which is the best choice.

10.A decrease in supply will cause the greatest change in prices if demand is______________.

a.inelastic

b.elastic

c.unitarily elastic

d.none is true, because the elasticity of demand does not change the effects of a change in supply.