Question 1

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 2

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

Accepted Answer

This is true because in the long run, oil producers can increase their supply of oil, while consumers can reduce their demand for oil by finding alternative sources of energy. This makes both supply and demand more elastic, meaning that they are more responsive to changes in price. As a result, OPEC's attempts to maintain a high price of oil through production cuts were ultimately unsustainable and unsuccessful.

Question 3

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....

Question 4

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

Accepted Answer

Drug interdiction may not necessarily decrease drug-related crime because the demand for drugs is often considered to be elastic, meaning that drug users may shift to other sources or turn to crime to obtain drugs. It is also important to address the root causes of drug use and addiction, such as poverty, mental health, and social inequities, in addition to reducing drug supply through interdiction efforts.

Question 5

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

Accepted Answer

A horizontal supply curve indicates that suppliers are willing and able to supply any quantity at a given price. This means that even a small change in price will result in a large change in the quantity supplied, making supply perfectly elastic and the price elasticity of supply infinite.

Question 6

A government program that reduces land under cultivation hurts farmers but helps consumers.

Accepted Answer

Reducing land under cultivation typically decreases the supply of agricultural products, which can lead to higher prices for consumers. Farmers might benefit from higher prices for their products, but consumers face increased costs.

Question 7

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 8

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, it would be 75% / 25% = 3.

Question 9

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Accepted Answer

The formula for price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Given the observation, the percentage change in quantity supplied (20%) is twice as large as the percentage change in price (10%), which means that the price elasticity of supply is equal to 2.

Question 10

Supply tends to be more elastic in the short run and more inelastic in the long run.

Accepted Answer

Supply tends to be more inelastic in the short run because producers need time to adjust their production levels, whereas in the long run, they can adjust their production capacity, making supply more elastic.

Question 11

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

Accepted Answer

The answer of If the price elasticity of supply is...

Question 12

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Accepted Answer

The answer of A discovery that increases wheat yields per...

Question 13

Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why?
a.water or diamonds
b.insulin or nasal decongestant spray
c.food in general or breakfast cereal
d.gasoline over the course of a week or gasoline over the course of a year
e.personal computers or IBM personal computers

Accepted Answer

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

Question 14

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Accepted Answer

Price elasticity of supply is a measure of how responsive suppliers are to a change in the price of a good or service. It indicates the percentage change in quantity supplied in response to a percentage change in price. Therefore, option A is correct that price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Question 15

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 16

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

Accepted Answer

The statement is incorrect. Supply is said to be inelastic if the quantity supplied responds only slightly to changes in the price and elastic if the quantity supplied responds substantially to price.

Question 17

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

Accepted Answer

By reducing the supply of corn through not planting on part of their land, the program can cause an increase in the market price of corn, benefiting farmers who do choose to plant and sell their corn.

Question 18

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

Accepted Answer

The answer of A discovery that increases wheat yields per...

Question 19

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 20

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.

Accepted Answer

The price elasticity of supply is calculated as the percentage change in quantity supplied divided by the percentage change in price. In this case, the quantity supplied increases from 1,000 to 1,200 (a 20% increase) when the price increases from $10 to $12 (a 20% increase), resulting in a price elasticity of supply of 1 (20%/20%).

Quiz 5: Elasticity and Its Application

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.

OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the demand for oil are more elastic in the long run than in the short run.

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

If a supply curve is horizontal, then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity.

A government program that reduces land under cultivation hurts farmers but helps consumers.

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.

When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.

If we observe that when the price of ice cream rises by 10%, ice cream manufacturers increase the quantity supplied of ice cream by 20%, then the price elasticity of supply is 2.

Supply tends to be more elastic in the short run and more inelastic in the long run.

If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%.

A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues.

Price elasticity of supply measures how much the quantity supplied responds to changes in the price.

Supply is said to be inelastic if the quantity supplied responds substantially to changes in the price and elastic if the quantity supplied responds only slightly to price.

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues.

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.

If a t-shirt manufacturer supplies 1,000 t-shirts per week when the price of t-shirts is $10 and supplies 1,200 t-shirts per week when the price of t-shirts is $12, the price elasticity of supply is 2.