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A firm is operating at 90% capacity. When the market price for their product rises and they want to increase QS, ……….

A firm is operating at 90% capacity. When the market price for their product rises and they want to increase QS, ………. They will be able to respond because their S will be relatively elastic They will not be able to respond very much because their S will be relatively inelastic.

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A firm is operating at 90% capacity. When the market price for their product rises and they want to increase QS, ……….

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  1. A firm is operating at 90% capacity. When the market price for their product rises and they want to increase QS, ………. • They will be able to respond because their S will be relatively elastic • They will not be able to respond very much because their S will be relatively inelastic

  2. The firm has 3 months worth of production held in inventory. The market price has increased. • The firm will respond by increasing S – simply by bringing the inventory to market • The firm has a relatively elastic Supply • Neither 1 or 2 • Both 1 and 2

  3. --Firm A makes cookies. They can easily change from one brand of flour to another. --Firm B makes a special diet cookie that must use a only Brand X flour. • Both firms have elastic S curves • Neither firm has an elastic S curve • Firm A- inelastic S curve • Firm B – elastic S curve • Firm A – elastic S ; Firm B – inelastic S

  4. Which scenario would create an inelastic S curve? • A firm was able to convince its highly skilled workers to move to the west coast to build a new production facility • An accounting firm has very little physical capital besides its office furniture. There was a significant increase in demand for accountants in Europe • Both 1 and 2 would result in elastic S curves • Both 1 and 2 would result in inelastic S curves

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