Question 1

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?
A)Farm revenues increase.
B)Farm revenues decrease.
C)Farm revenues remain constant because consumers will not increase their consumption of farm products by much.
D)Farm revenues could increase or decrease depending on the cost of this new equipment.

Accepted Answer

The answer of The demand for most farm products is...

Question 2

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent, what will be the decrease in the quantity of gasoline demanded?
A)0.5 percent
B)3.0 percent
C)8.33 percent
D)50 percent

Accepted Answer

The price elasticity of demand formula is: % change in quantity demanded = elasticity * % change in price. Here, -0.06 * 50% = -3.0%.

Question 3

Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon.What is the new equilibrium quantity of gasoline demanded after the tax is imposed?
A)109.72 billion gallons per year
B)127.25 billion gallons per year
C)148.27 billion gallons per year
D)161.61 billion gallons per year

Accepted Answer

The price elasticity of demand formula is used: % change in quantity demanded = elasticity * % change in price. The % change in price is ($0.75/$3.50) * 100 = 21.43%. The % change in quantity demanded is -0.06 * 21.43% = -1.2858%. The new quantity demanded is 150 billion * (1 - 0.012858) = 148.27 billion gallons.

Question 4

The paradox of American farming is
A)the demand for imported luxury food products has risen as the demand for domestic food products has fallen.
B)the demand for food has risen as the number of people who pursue farming as a career has fallen.
C)food has become cheaper and more abundant as the number of farms has decreased.
D)the amount of food produced has increased as the average farm size has fallen.

Accepted Answer

The answer of The paradox of American farming is
A)the demand...

Question 5

Which of the following is one reason why the income of small family farms has decreased over time?
A)Technology has increased farm productivity and market supply.
B)The demand for farm products is price elastic.
C)The demand for farm products is income inelastic.
D)The U.S. population has increased greatly since 1950.

Accepted Answer

The answer of Which of the following is one reason...

Question 6

Between 1950 and 2015, the number of acres devoted to wheat production in the United States ________ and the price of wheat ________.
A)declined; decreased
B)more than doubled; increased by about 50 percent
C)declined; more than doubled
D)increased; more than doubled

Accepted Answer

According to the information given in the question, the number of acres devoted to wheat production declined and the price of wheat decreased. Therefore, the correct choice is A.

Question 7

From 1950 to 2015 the number of people who lived on farms fell from 23 million to fewer than 3 million? Which of the following factors have contributed to this trend?
A)increases in the cost of farming and a desire for young adults to move to urban areas
B)rapid growth in farm production and low income and price elasticities for food products
C)slow growth in agricultural productivity and low income elasticities for food products
D)government policies that have increased the cost of living and working on farms

Accepted Answer

Rapid growth in farm production has led to fewer people needed to work on farms, and low income and price elasticities for food products mean that demand doesn't increase significantly with income, reducing the need for a large farming workforce.

Question 8

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Accepted Answer

The answer of Explain the concepts of cross-price elasticity of...

Question 9

Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded.Economic analysis would lead one to conclude that
A)gasoline should be taxed because the benefits of the tax would exceed the costs.
B)gasoline should not be taxed because the benefits are uncertain.
C) gasoline should not be taxed on ethical grounds since ethical benefits and costs can't be measured.
D)the benefits of taxing gasoline is a normative issue. Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

Accepted Answer

Economic analysis can provide information about the potential effects of a gasoline tax, such as the magnitude of the price increase and the quantity demanded. However, whether or not to tax gasoline is ultimately a normative issue that depends on values and priorities beyond the scope of economic analysis alone.

Question 10

Since 1950, there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?
A)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is greater than 1.
B)The absolute value of the price elasticity of demand for wheat is greater than 1 and wheat is a close substitute for other food products.
C)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low.
D)The income elasticity of demand for wheat is high and wheat is an inferior good.

Accepted Answer

The answer of Since 1950, there has been a substantial...

Question 11

What factors would make you more sensitive or less sensitive to price when purchasing gasoline?

Accepted Answer

The answer of What factors would make you more sensitive...

Question 12

Between 1950 and 2015 the productivity of wheat farmers in the United States more than doubled.This means that
A)the amount of land and other resources devoted to wheat production more than doubled.
B)the incomes of wheat farmers more than doubled.
C)the total amount of wheat produced more than doubled.
D)the amount of wheat produced by the average farmer more than doubled.

Accepted Answer

Productivity doubling means that the output per unit of input (such as per farmer) has more than doubled, indicating that the average farmer produces more wheat than before.

Question 13

The price of wheat has fallen since 1950.Which of the following explains this price decline?
A)The price elasticity of demand is less than 1 (in absolute value)and the income elasticity of demand for wheat is low.
B)The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is low.
C)The price elasticity of demand is less than 1 (in absolute value)and wheat is an inferior good.
D)The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is greater than 1.

Accepted Answer

The answer of The price of wheat has fallen since...

Question 14

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent.Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee.What is the relationship between the two products?

Accepted Answer

The answer of When the price of Starbucks coffee increased...

Question 15

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.

Accepted Answer

The answer of Suppose a 4 percent increase in income...

Question 16

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Accepted Answer

The answer of The demand for most farm products is...

Question 17

Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is 150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon, which increases the price of gasoline by $0.75 per gallon.How much revenue does the federal government receive from the tax?
A)$95.44 billion
B)$111.20 billion
C)$148.27 billion
D)$161.61 billion

Accepted Answer

The answer of Suppose the price of gasoline is $3.50...

Question 18

Most food products have low income and price elasticities of demand.

Accepted Answer

Most food products are considered necessities and have relatively few substitutes, leading to a low income and price elasticity of demand.

Question 19

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?
A)The decrease in supply led to huge price increases.
B)Tomatoes are necessities.
C)The demand for tomatoes is price inelastic.
D)The cross-price elasticity between tomatoes and most other substitute vegetables is very low.

Accepted Answer

The answer of Suppose a frost destroys the tomato crop...

Question 20

Table 6-7
 
-Refer to Table 6-7.
a.Using the information in the table, calculate the income elasticity of demand for good X and characterize the good.Use the midpoint formula.
b.Can you calculate the income elasticity of demand for good Y? If you can, show your calculation and characterize the good.If you cannot, explain why.

Accepted Answer

The answer of Table 6-7
 
-Refer to Table 6-7.
a.Using the...

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

The demand for most farm products is relatively inelastic.All else constant, what is the effect on farm revenues as a result of the introduction of new and better farm equipment which increases productivity?

Assume that the price elasticity of demand for gasoline is -0.06.If the government tax causes the price of gasoline to increase by 50 percent, what will be the decrease in the quantity of gasoline demanded?

The paradox of American farming is

Which of the following is one reason why the income of small family farms has decreased over time?

Between 1950 and 2015, the number of acres devoted to wheat production in the United States and the price of wheat .

From 1950 to 2015 the number of people who lived on farms fell from 23 million to fewer than 3 million? Which of the following factors have contributed to this trend?

Explain the concepts of cross-price elasticity of demand and income elasticity of demand.What do positive and negative values indicate for each of these demand elasticities?

Assume that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in the quantity of gasoline demanded.Economic analysis would lead one to conclude that

Since 1950, there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?

What factors would make you more sensitive or less sensitive to price when purchasing gasoline?

Between 1950 and 2015 the productivity of wheat farmers in the United States more than doubled.This means that

The price of wheat has fallen since 1950.Which of the following explains this price decline?

When the price of Starbucks coffee increased by 8 percent, the quantity demanded of Peet's coffee increased by 10 percent.Calculate the cross-price elasticity of demand between Starbucks coffee and Peet's coffee.What is the relationship between the two products?

Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.

The demand for most farm products is relatively inelastic.A drought that reduces the supply of farm products will also cause farm revenues to fall.

Most food products have low income and price elasticities of demand.

Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues.Which of the following best explains this?