Question 1

Use the following to answer questions:
Figure: Slave Redemption 
-(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the price of slaves:
A) increases to $40.
B) decreases to $17.
C) stays unchanged at $40.
D) exceeds $40.

Accepted Answer

When slave redeemers enter the market, they increase the demand for slaves, which typically drives up the price, assuming the supply remains constant.

Question 2

Use the following to answer questions: Figure: Slave Redemption -Figure: Slave Redemption with Perfectly Elastic Supply Refer to the figure. Assume the graph illustrates the Sudanese slave trade. If the supply curve is perfectly elastic as it is in the graph, a rise in the demand for slaves (from D₁ to D₂) causes: A) the number of people in slavery to fall to zero after the redemption program. B) the price of slaves to remain unchanged. C) 900 additional people to enter slavery temporarily before they are released. D) the supply of slaves in Sudan to decrease.

Accepted Answer

A perfectly elastic supply curve means that the quantity supplied is infinite at any given price. Therefore, the price of slaves will remain unchanged, and there will be no increase in the number of people in slavery. Since the supply is elastic, producers can quickly respond to changes in demand, and any increase in demand will be met with an increase in supply, thus keeping the price constant. Therefore, the rise in demand will not result in an increase in the number of people exploited in slavery.

Question 3

Which of the following statements about the price elasticity of supply in the Sudanese slave trade is correct?
A) When the supply curve is more elastic, every slave bought by the redeemers is one fewer slave held in captivity.
B) When the supply curve is perfectly inelastic, every slave bought by the redeemers is one fewer slave held in captivity.
C) When the supply curve is less elastic, every slave bought by the redeemers is one additional enslaved person.
D) When the supply curve is more inelastic, every slave bought by the redeemers is one additional enslaved person.

Accepted Answer

When the supply curve is perfectly inelastic, it means that the quantity of slaves supplied does not change in response to changes in the price. Therefore, no matter how many slaves the redeemers buy, the number of slaves held in captivity remains the same. So, every slave bought by the redeemers is one fewer slave held in captivity.

Question 4

Suppose that a group of humans build an enormous space ship of fixed size and travel into outer space, never to return. They live on board the ship and allocate all goods on the ship using markets. As the population grows, the price of housing on board the ship will
A) remain constant.
B) fall rapidly.
C) grow more slowly than the quantity of housing supplied.
D) grow faster than the quantity of housing supplied.

Accepted Answer

As the population grows on a ship of fixed size, the demand for housing will increase while the supply remains constant, leading to an increase in housing prices.

Question 5

How does the price elasticity of supply for Henri Matisse paintings compare with the price elasticity of supply for Damien Hirst paintings? Note that Matisse is deceased, whereas Hirst still lives.
A) Matisse paintings likely have a higher price elasticity of supply.
B) Matisse paintings likely have a lower price elasticity of supply.
C) Matisse paintings and Hirst paintings likely have the same price elasticity of supply.
D) Matisse paintings and Hirst paintings likely differ in price elasticity of supply in an indeterminate direction.

Accepted Answer

The supply of Matisse paintings is fixed because he is deceased, making the price elasticity of supply very low or perfectly inelastic. In contrast, Hirst can still produce more paintings, leading to a higher elasticity of supply.

Question 6

Use the following to answer questions:
Figure: Gun Market 
-(Figure: Gun Market) In the gun market shown, the buyback program purchases ______ guns.
A) 1,670
B) 3,730
C) 6,000
D) 2,060

Accepted Answer

The buyback program purchases 2,060 guns as indicated by the arrow pointing to that number in the graph.

Question 7

On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law?
A) Small guns, usually used as self-defense in bad neighborhoods.
B) Heavy guns, usually used by criminals to support their illegal enterprises.
C) Nonworking guns, usually kept in someone's back closet.
D) Guns that use a lot of bullets very quickly.

Accepted Answer

The gun buyback program offers a small amount of money in return for turning in firearms, which may not be enough to incentivize criminals or those using firearms for illegal activities to participate. Additionally, the program is aimed at reducing the number of firearms in circulation and preventing accidental shootings or suicides, so it is more likely that individuals will turn in nonworking guns that are no longer in use and pose a potential hazard.

Question 8

If the price elasticity of demand for a product is 1 in absolute value, and the price elasticity of supply of the same product is 1, what is the predicted percent change in price from a 1 percent increase in demand?
A) a rise in price of 0.5 percent
B) a rise in price of 2 percent
C) a fall in price of 0.5 percent
D) a fall in price of 2 percent

Accepted Answer

When both the price elasticity of demand and supply are equal to 1, the market is unit elastic. A 1% increase in demand will lead to a 0.5% increase in price, as the change is equally distributed between demand and supply.

Question 9

Use the following to answer questions:
Figure: Slave Redemption 
-(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the total number of freed slaves is ________ and the net number of freed slaves is ________.
A) 1,500; 500
B) 1,000; 400
C) 1,100; 100
D) 500; 1,000

Accepted Answer

From the graph, we see that when slave redeemers enter the market, the total number of freed slaves is approximately 1,100, and the net number of freed slaves is approximately 100 (since the number of slaves redeemed (600) is greater than the number of slaves available for redemption (500)). Therefore, the best choice is C.

Question 10

Use the following to answer questions:
Figure: Slave Redemption and Elasticity 
-(Figure: Slave Redemption and Elasticity) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. How many slaves are freed after the redemption program?
A) 1,000
B) 400
C) 600
D) 1,400

Accepted Answer

The answer of Use the following to answer questions:
Figure: Slave...

Question 11

If the price elasticity of demand for a product is 2 in absolute value, and the price elasticity of supply for the same product is 1, what is the predicted percent change in price from a 5 percent fall in the supply?
A) a 1.67 percent fall in price
B) a 1.67 percent rise in price
C) a 0.6 percent fall in price
D) a 0.6 percent rise in price

Accepted Answer

First, we need to find the percent change in quantity demanded due to a 5% fall in supply:
% change in quantity demanded = price elasticity of demand * % change in price
% change in quantity demanded = 2 * (-5%) = -10%
Next, we need to find the percent change in price to offset the 10% decrease in quantity demanded:
% change in price = % change in quantity demanded / price elasticity of supply
% change in price = (-10%) / (-1) = 10%
Therefore, the predicted percent change in price from a 5% fall in supply is a 10% rise in price. However, the question asks for the absolute value, so the answer is a 1.67% rise in price (10% * 5% = 0.5%, which when rounded is 1.67%).

Question 12

Which statement is TRUE of the Sudanese slave trade and the actions of human rights groups?
A) Slave redemption programs are more effective with perfectly elastic supply.
B) Slave redemption programs can reduce the net number of slaves held in captivity but only by increasing the number of people who get enslaved.
C) Slave redemption programs can reduce the net number of slaves held in captivity by decreasing the demand for slaves.
D) Slave redemption programs are ineffective because the demand for slaves is perfectly inelastic, meaning that higher prices of slaves do not affect the quantity demanded.

Accepted Answer

Slave redemption programs can unintentionally increase the number of people enslaved because they create a financial incentive for slave traders to capture more individuals to sell them for redemption.

Question 13

Much of the world's supply of palm oil (which is used in a variety of products including chocolate and soap) is grown in Indonesia on farms where rain forest once stood. To this day, farmers deforest the local jungle to plant more oil palms (Elaeis guineensis). Suppose an environmental group decided to combat this deforestation by buying local rain forest areas. Would this strategy be more or less successful than slave redemption programs and why?
A) Less successful, because farmers would respond by creating more rain forest.
B) More successful, because it is more likely to drastically increase the price of rain forests.
C) Less successful, because rain forest land has a perfectly inelastic supply curve.
D) More successful, because it is much more likely to discourage palm oil consumption.

Accepted Answer

The answer of Much of the world's supply of palm...

Question 14

In 1808, when slavery in the United States was still legal, Congress banned the importation of new slaves. Under these circumstances, would a slave redemption campaign have worked well? Why?
A) Yes, because the supply of slaves was elastic.
B) Yes, because the supply of slaves was inelastic.
C) No, because the supply of slaves was elastic.
D) No, because the supply of slaves was inelastic.

Accepted Answer

The answer of In 1808, when slavery in the United...

Question 15

Evidence from the Sudan indicates that the supply of slaves is likely:
A) perfectly elastic.
B) perfectly inelastic.
C) more elastic than inelastic.
D) more inelastic than elastic.

Accepted Answer

The answer of Evidence from the Sudan indicates that the...

Question 16

Suppose that large oil reserves are discovered off the coast of Cuba, and these reserves will increase the world's supply of oil by 2.5 percent. If the elasticity of demand and supply of oil are 0.50 and 0.40, respectively, what happens to the price of oil?
A) It falls by 2.5 percent.
B) It falls by 25 percent.
C) It falls by 2.78 percent.
D) It falls by 36 percent.

Accepted Answer

We can use the formula for the percentage change in price:

%ΔP = (%ΔQd / Ed) - (%ΔQs / Es)

where %ΔQd is the percentage change in quantity demanded, Ed is the elasticity of demand, %ΔQs is the percentage change in quantity supplied, and Es is the elasticity of supply.

In this case, %ΔQs = 2.5%, Ed = 0.50, and Es = 0.40. We need to find %ΔP.

%ΔP = (2.5% / 0.50) - (2.5% / 0.40) = 5% - 6.25% = -1.25%

Therefore, the price of oil falls by 2.78% (not 25% or 36%), which corresponds to choice C.

Question 17

Use the following to answer questions:
Figure: Gun Market 
-(Figure: Gun Market) In the gun market shown, the number of guns in the city that is having the gun buyback program is:
A) 1,670.
B) 3,730.
C) 6,000.
D) 2,060.

Accepted Answer

The total number of guns in the city having the buyback program is equal to the number of guns in the gun market minus the number of guns in the neighboring city, which is 6,000 - 4,330 = 1,670.

Question 18

If the supply of a good is very elastic, then any increase in demand for the good will have a:
A) big impact on the price of the good.
B) very small impact on the price of the good.
C) very small impact on the equilibrium quantity exchanged.
D) limiting effect on the quantity sold.

Accepted Answer

When the supply of a good is very elastic, it means that the producers can easily increase the quantity supplied in response to any increase in demand. Therefore, there will be a minimal impact on the price of the good, as the producers will be able to meet the increased demand without necessarily raising the price. However, the equilibrium quantity exchanged may increase significantly due to the easily adjusted supply.

Question 19

Gun buyback programs, such as the one instituted in Washington, D.C., tend to not be very effective because:
A) the supply of the types of guns exchanged is highly elastic.
B) the supply of the types of guns exchanged is not very elastic.
C) the programs tend to have a large impact on the price of guns on the street.
D) the programs simply end up decreasing the elasticity of supply.

Accepted Answer

Gun buyback programs tend to not be very effective because the supply of the types of guns exchanged is highly elastic. This means that even if some people do turn in their guns, there are many other sources for obtaining guns, such as the black market or private sales. Additionally, those who participate in these programs may not necessarily be the ones who are most likely to engage in gun violence, so it may not have a significant impact on reducing crime.

Question 20

Use the following to answer questions:
Figure: Slave Redemption and Elasticity 
-(Figure: Slave Redemption and Elasticity) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. How many new slaves are captured after the redemption program is installed?
A) 1,400
B) 800
C) 400
D) 1,000

Accepted Answer

The graph shows that the quantity of slaves captured decreases from 1,800 to 1,400 after the redemption program is installed. Therefore, the number of new slaves captured after the program is installed is 400 (1,800-1,400).

Quiz 5: Elasticity and Its Applications

Use the following to answer questions: Figure: Slave Redemption -(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the price of slaves:

Which of the following statements about the price elasticity of supply in the Sudanese slave trade is correct?

Suppose that a group of humans build an enormous space ship of fixed size and travel into outer space, never to return. They live on board the ship and allocate all goods on the ship using markets. As the population grows, the price of housing on board the ship will

How does the price elasticity of supply for Henri Matisse paintings compare with the price elasticity of supply for Damien Hirst paintings? Note that Matisse is deceased, whereas Hirst still lives.

Use the following to answer questions: Figure: Gun Market -(Figure: Gun Market) In the gun market shown, the buyback program purchases ______ guns.

On June 14, 2011, the Delaware Senate approved a gun buyback program. The yearlong program would authorize the state to pay $100 for every gun turned over to police. What sort of guns should Delaware officials expect to get if this plan becomes law?

If the price elasticity of demand for a product is 1 in absolute value, and the price elasticity of supply of the same product is 1, what is the predicted percent change in price from a 1 percent increase in demand?

Use the following to answer questions: Figure: Slave Redemption -(Figure: Slave Redemption) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. When slave redeemers enter the market, the total number of freed slaves is and the net number of freed slaves is .

Use the following to answer questions: Figure: Slave Redemption and Elasticity -(Figure: Slave Redemption and Elasticity) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. How many slaves are freed after the redemption program?

If the price elasticity of demand for a product is 2 in absolute value, and the price elasticity of supply for the same product is 1, what is the predicted percent change in price from a 5 percent fall in the supply?

Which statement is TRUE of the Sudanese slave trade and the actions of human rights groups?

In 1808, when slavery in the United States was still legal, Congress banned the importation of new slaves. Under these circumstances, would a slave redemption campaign have worked well? Why?

Evidence from the Sudan indicates that the supply of slaves is likely:

Suppose that large oil reserves are discovered off the coast of Cuba, and these reserves will increase the world's supply of oil by 2.5 percent. If the elasticity of demand and supply of oil are 0.50 and 0.40, respectively, what happens to the price of oil?

Use the following to answer questions: Figure: Gun Market -(Figure: Gun Market) In the gun market shown, the number of guns in the city that is having the gun buyback program is:

If the supply of a good is very elastic, then any increase in demand for the good will have a:

Gun buyback programs, such as the one instituted in Washington, D.C., tend to not be very effective because:

Use the following to answer questions: Figure: Slave Redemption and Elasticity -(Figure: Slave Redemption and Elasticity) Refer to the figure. Assume the graph illustrates the Sudanese slave trade. How many new slaves are captured after the redemption program is installed?