A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Question

BlackTom AI · Accepted Answer

This question asks about the price elasticity of supply for a firm that fixes its output at 1,000 units regardless of the market price.
Option 1: 'zero which is perfectly inelastic' aligns with the idea that the quantity supplied does not change with price; a constant output indicates supply is perfectly inelastic, so elasticity is 0.
Option 2: 'negative one' would imply that supply decreases as price rises by a fixed proportion; that contradicts the situation where output is fixed and unresponsive to price changes, making this option inconsistent with the scenario.
Option 3: 'infinity which is perfectly elastic' describes a situation where quantity supplied responds without limit to any price change; this would occur if producers could adjust output arbitrarily with price, which is not happening here, so this is incorrect.
Option 4: 'one' suggests unitary elasticity, where percentage change in quantity supplied equals the percentage change in price; again, the firm does not adjust quantity at all, so this does not fit the description of a fixed output.
In sum, a firm that produces a fixed quantity regardless of price exhibits zero elasticity of supply, i.e., perfectly inelastic supply, because price movements do not influence the quantity supplied.

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