Multiple choice

A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is

  1. zero

  2. infinity

  3. equal to one

  4. greater than zero but less than one
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A horizontal supply curve indicates perfectly elastic supply - firms can supply any quantity at the given price, and elasticity of supply equals infinity. This means even a tiny price decrease would reduce quantity supplied to zero, while a tiny price increase would lead to unlimited supply. Options A, C, and D are incorrect - the elasticity is neither zero, one, nor between zero and one.

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