Question 1

Drug interdiction,which reduces the supply of drugs,will likely be a less effective policy than educating consumers to reduce their demand for drugs because the drug interdiction policy will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

Drug interdiction, aimed at reducing the supply of drugs, typically increases drug prices due to the reduced availability, making them less accessible to consumers, which can reduce the quantity demanded. However, the effectiveness of education in reducing demand can vary and is not directly related to the effects of interdiction on prices.

Question 2

The OPEC oil cartel has difficulty maintaining high prices in the long run because the supply of oil is more inelastic in the long run than in the short run.

Accepted Answer

In the long run, the supply of oil becomes more elastic as producers have more time to adjust to price changes, making it harder for OPEC to maintain high prices.

Question 3

A "Just Say No" drug education policy that successfully educates consumers to reduce their demand for drugs will lower drug prices and reduce the quantity of drugs demanded.

Accepted Answer

The answer of A "Just Say No" drug education policy...

Question 4

When the Shaffers had a monthly income of $4,000,they usually ate out 8 times a month.Now that the couple makes $4,500 a month,they eat out 10 times a month.Compute the couple's income elasticity of demand using the midpoint method.Explain your answer.Is a restaurant meal a normal or inferior good to the couple?

Accepted Answer

The answer of When the Shaffers had a monthly income...

Question 5

You own a small town movie theatre.You currently charge $5 per ticket for everyone who comes to your movies.Your friend who took an economics course in college tells you that there may be a way to increase your total revenue.Given the demand curves shown,answer the following questions.

a.What is your current total revenue for both groups?
b.The elasticity of demand is more elastic in which market?
c.Which market has the more inelastic demand?
d.What is the elasticity of demand between the prices of $5 and $2 in the adult market? Is this elastic or inelastic?
e.What is the elasticity of demand between $5 and $2 in the children's market? Is this elastic or inelastic?
f.Given the graphs and what your friend knows about economics,he recommends you increase the price of adult tickets to $8 each and lower the price of a child's ticket to $3.How much could you increase total revenue if you take his advice?

Accepted Answer

The answer of You own a small town movie theatre.You...

Question 6

Drug interdiction,which reduces the supply of drugs,may decrease drug-related crime because the demand for drugs is inelastic.

Accepted Answer

The statement is false. While drug interdiction may temporarily decrease the supply of drugs, it does not necessarily reduce the demand for drugs. Inelastic demand means that a change in price will not significantly affect the quantity demanded. However, when it comes to illegal drugs, the demand is often driven by addiction, which is not inelastic. In fact, drug-related crime may increase as drug users become more desperate to obtain drugs when the supply is disrupted. Additionally, interdiction efforts may push drug production and distribution into more violent and dangerous channels, leading to an increase in crime.

Question 7

Recently,in Smalltown,the price of Twinkies fell from $0.80 to $0.70.As a result,the quantity demanded of Ho-Ho's decreased from 120 to 100.What would be the appropriate elasticity to compute? Using the midpoint method,compute this elasticity.What does your answer tell you?

Accepted Answer

The answer of Recently,in Smalltown,the price of Twinkies fell from...

Question 8

Use the graph shown to answer the following questions.Put the correct letter(s)in the blank.
  
a.The elastic section of the graph is represented by section from _______.
b.The inelastic section of the graph is represented by section from _______.
c.The unit elastic section of the graph is represented by section _______.
d.The portion of the graph in which a decrease in price would cause total revenue to fall would be from _________.
e.The portion of the graph in which a decrease in price would cause total revenue to rise would be from _________.
f.The portion of the graph in which a decrease in price would not cause a change in total revenue would be _________.
g.The section of the graph in which total revenue would be at a maximum would be _______.
h.The section of the graph in which elasticity is greater than 1 is _______.
i.The section of the graph in which elasticity is equal to 1 is ______.
j.The section of the graph in which elasticity is less than 1 is _______.

Accepted Answer

The answer of Use the graph shown to answer the...

Question 9

Consider the following pairs of goods.For which of the two goods would you expect the demand to be more price elastic? Why?

Accepted Answer

The answer of Consider the following pairs of goods.For which...

Question 10

Using the midpoint method,compute the elasticity of demand between points A and B.Is demand along this portion of the curve elastic or inelastic? Interpret your answer with regard to price and quantity demanded.Now compute the elasticity of demand between points B and C.Is demand along this portion of the curve elastic or inelastic?

Accepted Answer

The answer of Using the midpoint method,compute the elasticity of...

Quiz 5: Elasticity and Its Application