PRC-3 · Chapter 11 · Question 36 of 57
Why is the price elasticity of supply (PES) usually much higher in the long run than in the short run?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Because in the long run, firms have time to build new factories and acquire more fixed capital
Explanation
Supply elasticity depends heavily on time. In the long run, firms can expand their physical production capacity, making supply highly responsive to price changes.
More Elasticity of Demand and Supply MCQs
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- Q39When a firm lowers the price of its product, it experiences a massive surge in quantity demanded that completely overwhelms the price cut…
- Q40Which type of goods generally possess a 'more elastic' supply curve because they can be easily stored in warehouses without rotting while…
- Q41If the government imposes a new tax on a good with highly elastic demand, who will bear the majority of the tax burden (incidence)?
- Q42If a 5% increase in price causes absolutely no change in the quantity supplied of a good, the elasticity of supply is: