Question 1

The government of Bassaland is looking for new revenue sources.It is considering imposing an excise tax on two goods: palm wine and diapers.If the price elasticity of demand for the goods are -0.47 and -1.89 respectively,which good should it tax if the goal is to raise revenue? If the government wants to tax only one good,which good should it tax if the goal is to discourage consumption? Explain your answer.

Accepted Answer

The answer of The government of Bassaland is looking for...

Question 2

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 3

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

The productivity of wheat farmers refers to the amount of wheat produced per unit of resources, such as labor, land, and inputs. Since the productivity more than doubled, it means that the amount of wheat produced by the average farmer more than doubled, indicating an increase in efficiency and output per farmer.

Question 4

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 formula to calculate the percentage change in quantity demanded is:

% Change in quantity demanded = % Change in price * Price elasticity of demand

Here, % Change in price = 50%
Price elasticity of demand = -0.06

Substituting the values, we get:

% Change in quantity demanded = 50%*(-0.06) = -3%

Therefore, the decrease in the quantity of gasoline demanded will be 3%. The best choice is B.

Question 5

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

The answer of From 1950 to 2015 the number of...

Question 6

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 increase...

Question 7

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 8

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 9

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 10

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 11

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 12

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

First, we need to calculate the new price of gasoline after the excise tax increase:

New price = $3.50 + $0.75 = $4.25 per gallon

Next, we need to calculate the new quantity of gasoline demanded using the price elasticity of demand:

% change in quantity demanded = -0.06 x % change in price
% change in price = ($1.00/$3.50) x 100% = 28.57%

% change in quantity demanded = -0.06 x 28.57% = -1.71%

New quantity demanded = 150 billion gallons x (1-1.71%) = 147.42 billion gallons

Now, we can calculate the revenue received from the tax:

Tax revenue = (New price - Old price) x New quantity demanded
Tax revenue = ($4.25 - $3.50) x 147.42 billion gallons
Tax revenue = $11.07 billion

However, this is only the revenue received from a $1.00 per gallon excise tax increase. If we want to calculate the total revenue received from all excise taxes on gasoline, we would need to know the total tax rate (which includes state and local taxes) and the total quantity of gasoline sold. Based on the given information, we cannot calculate the total revenue received from all excise taxes on gasoline.

Question 13

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 14

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

Accepted Answer

This is because food products are considered necessities and consumers will continue to purchase them even if their prices increase or their income decreases.

Question 15

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 valuable insight into the effects of a gasoline tax, such as the price increase and quantity demanded decrease. However, whether or not to tax gasoline is ultimately a normative issue, as it involves weighing the potential benefits (such as reduced carbon emissions and revenue for government programs) against the potential costs (such as increased expenses for consumers and businesses). Therefore, economic analysis can contribute to the discussion of this issue, but cannot provide a definitive answer since it is ultimately a matter of values and priorities.

Question 16

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 17

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 18

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 19

Table 6-7
 $$\begin{array} { | l | l | c | c | } 
\hline & & \begin{array} { c } 
\text { Quantities } \
\text { Purchased }
\end{array} & \begin{array} { c } 
\text { Quantities } \
\text { Purchased }
\end{array} \
\hline \text { Income } & \text { Prices } & \text { Good X } & \text { Good Y } \
\hline \$ 30,000 & \text { Px } = \$ 6 , \mathrm { Py } = \$ 3 & 2 & 20 \
\hline 50,000 & \mathrm { Px } = \$ 6 , \mathrm { Py } = \$ 4 & 5 & 10 \
\hline
\end{array}$$
-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
 \[\begin{array} { | l |...

Question 20

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

Quiz 6: Elasticity: the Responsiveness of Demand and Supply

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

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

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 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?

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?

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.

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?

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?

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

The paradox of American farming is

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

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

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.

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

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?