Question 1

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

First, we need to calculate the price elasticity of demand after the tax is imposed:

Price elasticity of demand = (% change in quantity demanded) / (% change in price)
Since the price of gasoline increases by $0.75 per gallon, the percentage change in price is:

% change in price = ($0.75 / $3.50) x 100% = 21.4%
The price elasticity of demand is given as -0.06, so we can calculate the percentage change in quantity demanded as:

-0.06 = (% change in quantity demanded) / (21.4%)
% change in quantity demanded = -1.28%
Therefore, the new quantity demanded after the tax is imposed is:

New quantity demanded = (1 - 1.28%) x 150 billion gallons per year
New quantity demanded = 148.27 billion gallons per year

Therefore, the correct answer is C) 148.27 billion gallons per year.

Question 2

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

Accepted Answer

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

Question 3

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 4

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 5

Table 6-6
 
-Refer to Table 6-6.
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 6-6
 
-Refer to Table 6-6.
a.Using the...

Question 6

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 7

Between 1950 and 2013 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

The answer of Between 1950 and 2013 the number of...

Question 8

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 in 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 9

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

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 12

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 13

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

Using the formula for calculating the percentage change in quantity demanded:

%ΔQ = (%ΔP) * (Elasticity of demand)

%ΔP = 50% (since the price of gasoline has increased by 50%)

Elasticity of demand = -0.06

So,

%ΔQ = (50%) * (-0.06)

%ΔQ = -3%

Therefore, the decrease in the quantity of gasoline demanded will be 3%. The closest option is B, which is the correct answer.

Question 14

From 1950 to 2013 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

The answer of From 1950 to 2013 the number of...

Question 15

Between 1950 and 2013 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

The increase in productivity of wheat farmers means that the amount of wheat produced by the average farmer more than doubled. This does not necessarily mean that the amount of land and other resources devoted to wheat production also doubled or that farmers' incomes also increased by more than 100%.

Question 16

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 useful information and contribute to the discussion of whether to tax gasoline or not, but ultimately the decision is a normative one based on values and priorities, which cannot be determined solely through economic analysis. The fact that a 50 percent gasoline tax led to a large increase in its price and only a small decrease in quantity demanded suggests that the demand for gasoline may be relatively inelastic in the short run, but this does not necessarily imply that the benefits of taxing gasoline would exceed the costs. Moreover, the ethical implications of taxing gasoline are not relevant for determining the economic efficiency of such a tax, which depends on the relative magnitudes of the deadweight loss and revenue generated by the tax.

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

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...

Question 19

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

Accepted Answer

This is generally true for most food products, as they are considered to be necessities and consumers are less likely to significantly reduce their demand for food even if prices increase or their income decreases.

Question 20

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...

Quiz 6: Elasticity: The Responsiveness of Demand and Supply

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

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

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

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 ?

Between 1950 and 2013 the number of acres devoted to wheat production in the United States and the price of wheat .

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 in productivity?

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

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?

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

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.

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?

From 1950 to 2013 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?

Between 1950 and 2013 the productivity of wheat farmers in the United States more than doubled.This means that

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

The paradox of American farming is

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

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.