Acme Tools manufactures anvils, a forging tool. When the price of anvils was increased from $7 to $13, Acme Tools was willing and able to increase production from 1 to 4 units per day. Using the midpoint formula, what is Acme's price elasticity of supply for anvils?
a. 2
b. 1
c. 0.5
d. 4
e. 3.5
a
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The diagram below shows Spencer's annual demand for videos. Spencer currently rents videos from Blockpopper's, which charges $2.50 per rental.
(i) How many videos does Spencer rent each year? How much consumer's surplus does Spencer receive from renting videos?
(ii) Blockpopper's starts a "frequent viewers" club. For a membership fee of $35 per year, club members can rent as many videos as they wish at the discounted price of $2 per rental. Should Spencer join the "frequent viewers" club? If yes, how much surplus value would Spencer receive as a club member? If no, what membership fee would Spencer be willing to pay to join the club?
If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A. higher level of output and prices. B. lower level of output and prices. C. higher level of output at lower prices. D. lower level of output at higher prices.
Based on this graph, which of the following are the key results of an expansionary monetary policy?
a. Price level increases; real gross domestic product increases; aggregate demand increases.
b. Price level decreases; real gross domestic product increases; aggregate demand increases.
c. Price level decreases; real gross domestic product decreases; aggregate demand increases.
d. Price level increases; real gross domestic product decreases; aggregate demand decreases.
Which of the following is an example of a normative economic statement?
A) Lower income tax rates will generate greater income tax revenue to the government. B) Income tax rates should be lower because that will increase government revenue. C) Lower income tax rates yield a larger federal government deficit. D) The federal budget deficit has increased every year for the last twenty years.