Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter20: The Problem Of Adverse Selection Moral Hazard
Section: Chapter Questions
Problem 3MC
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The percentage change in the quantity supplied in the economy is divided by the percentage change in the price. The economy was producing and supplying 50 units at a price of $5 per unit. The increase in the quantity from 5 to 8 makes the quantity supplied equal to 130. Thus, the elasticity of supply can be calculated as follows:
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