Question 1

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?
A) Their revenue increases because price increases and demand is elastic.
B) Their revenue increases because price increases and demand is inelastic.
C) Their revenue decreases because price decreases and demand is inelastic.
D) Their revenue decreases because price increases and demand is elastic.

Accepted Answer

Since there was a severe drought in Wisconsin, it's likely that the supply of corn decreased, leading to higher prices. However, since the demand for corn is inelastic (people need it regardless of the price), Minnesota farmers could increase their revenue by selling their corn at the higher price caused by the drought.

Question 2

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The equilibrium quantity will
A) increase in both the aged cheddar cheese and bread markets.
B) increase in the aged cheddar cheese market and decrease in the bread market.
C) decrease in the aged cheddar cheese market and increase in the bread market.
D) decrease in both the aged cheddar cheese and bread markets.

Accepted Answer

The answer of Scenario 5-4
The supply of aged cheddar cheese...

Question 3

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will
A) raise both price and total revenues.
B) lower both price and total revenues.
C) raise price and lower total revenues.
D) lower price and raise total revenues.

Accepted Answer

The answer of Suppose researchers at the University of Wisconsin...

Question 4

How did the farm population in the United States change between 1950 and today?
A) It dropped from 10 million to fewer than 3 million people.
B) It dropped from 20 million to fewer than 5 million people.
C) It dropped from 30 million to just over 6 million people.
D) It increased from 10 million to almost 13 million people.

Accepted Answer

According to the United States Department of Agriculture, the farm population in the United States dropped from 10 million in 1950 to fewer than 3 million people in recent years.

Question 5

Figure 5-20 
-Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?
A) S1
B) S2
C) S3
D) All of the above are equally likely to be relevant over a very long period of time.

Accepted Answer

S3 represents a supply curve that is relatively flat and elastic, suggesting that suppliers can increase their production significantly without experiencing a large increase in costs. This indicates that over a long period of time, as technology and processes improve, more firms may be able to enter the market and produce goods at a lower cost, leading to an increase in supply. Therefore, S3 is likely to be the most relevant supply curve over a long period of time.

Question 6

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the
A) supply of wheat is elastic.
B) supply of wheat is inelastic.
C) demand for wheat is inelastic.
D) demand for wheat is elastic.

Accepted Answer

The answer of The discovery of a new hybrid wheat...

Question 7

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should
A) plant more corn so that they would be able to sell more each year.
B) increase spending on fertilizer in an attempt to produce more corn on the acres they farm.
C) reduce the number of acres on which they plant corn.
D) contribute to a fund that promotes technological advances in corn production.

Accepted Answer

The answer of Suppose that corn farmers want to increase...

Question 8

A decrease in supply will cause the smallest increase in price when
A) both supply and demand are inelastic.
B) demand is elastic and supply is inelastic.
C) both supply and demand are elastic.
D) demand is inelastic and supply is elastic.

Accepted Answer

The answer of A decrease in supply will cause the...

Question 9

A decrease in supply will cause the largest increase in price when
A) both supply and demand are inelastic.
B) both supply and demand are elastic.
C) demand is elastic and supply is inelastic.
D) demand is inelastic and supply is elastic.

Accepted Answer

When both supply and demand are inelastic, a decrease in supply will not be met with a significant change in quantity demanded, leading to a larger increase in price compared to other scenarios. Elasticity measures how much the quantity demanded or supplied responds to changes in price. Inelastic demand or supply means that the quantity demanded or supplied changes very little with price changes. Therefore, if supply decreases and neither consumers nor producers are responsive to price changes (inelastic), the price has to increase significantly to reach a new equilibrium.

Question 10

Between 1950 and today there was a
A) 20 percent drop in the number of farmers, but farm output more than tripled.
B) 30 percent drop in the number of farmers, but farm output more than tripled.
C) 50 percent drop in the number of farmers, but farm output more than doubled.
D) 70 percent drop in the number of farmers, but farm output more than doubled.

Accepted Answer

The answer of Between 1950 and today there was a
A)...

Question 11

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The change in equilibrium price will be
A) greater in the aged cheddar cheese market than in the bread market.
B) greater in the bread market than in the aged cheddar cheese market.
C) the same in the aged cheddar cheese and bread markets.
D) Any of the above could be correct.

Accepted Answer

The answer of Scenario 5-4
The supply of aged cheddar cheese...

Question 12

Good news for farming can be bad news for farmers because the
A) supply curve for an individual farmer is usually perfectly elastic.
B) supply curve for an individual farmer is usually perfectly inelastic.
C) demand for basic foodstuffs is usually inelastic, meaning that factors that shift supply to the right decrease total revenues to sellers.
D) demand for basic foodstuffs is usually elastic, meaning that factors that shift supply to the right increase total revenues to sellers.

Accepted Answer

When the supply for basic foodstuffs increases due to good news for farming (such as a bumper crop), the price of those goods decreases due to excess supply. However, the demand for basic foodstuffs is usually inelastic because consumers still need to purchase these goods regardless of the price. This means that factors that shift supply to the right (such as a bumper crop) decrease total revenues to sellers because farmers have to lower their prices in order to sell their surplus. This can be bad news for farmers who may not earn as much money as they had anticipated.

Question 13

An advance in farm technology that results in an increased market supply is
A) good for farmers because it raises prices for their products but bad for consumers because it raises prices consumers pay for food.
B) bad for farmers because total revenue will fall but good for consumers because prices for food will fall.
C) good for farmers because it raises prices for their products and also good for consumers because more output is available for consumption.
D) bad for farmers because total revenue will fall and bad for consumers because farmers will raise the price of food to increase their total revenue.

Accepted Answer

The answer of An advance in farm technology that results...

Question 14

There are fewer farmers in the United States today than 200 years ago because of
A) improvements in farm technology.
B) increased government regulations in farming.
C) an elastic demand for food.
D) environmental programs designed to reduce soil erosion.

Accepted Answer

Improvements in farm technology have allowed farmers to produce more food with less labor, leading to decreased demand for farmers and a decrease in their numbers over time.

Question 15

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should
A) use more fertilizers and weed killers to increase their yields.
B) plant additional acres to increase their output.
C) reduce the number of acres they plant to decrease their output.
D) Both a and b are correct.

Accepted Answer

The answer of If soybean farmers know that the demand...

Question 16

Scenario 5-4
The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%.
-Refer to Scenario 5-4. The equilibrium price will
A) increase in both the aged cheddar cheese and bread markets.
B) increase in the aged cheddar cheese market and decrease in the bread market.
C) decrease in the aged cheddar cheese market and increase in the bread market.
D) decrease in both the aged cheddar cheese and bread markets.

Accepted Answer

The answer of Scenario 5-4
The supply of aged cheddar cheese...

Question 17

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to
A) increase the total revenue of wheat farmers.
B) decrease the total revenue of wheat farmers.
C) decrease the demand for wheat.
D) decrease the supply of wheat.

Accepted Answer

The answer of Because the demand for wheat tends to...

Question 18

Farm programs that pay farmers not to plant crops on all their land
A) hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items.
B) help farmers by cutting costs, which helps consumers by lowering food prices.
C) help farmers by increasing total revenue in the market but hurt consumers by raising food prices.
D) help farmers directly since they receive government payments but have no real effects on consumers.

Accepted Answer

The answer of Farm programs that pay farmers not to...

Question 19

Figure 5-20 
-Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?
A) S1
B) S2
C) S3
D) None of the supply curves is perfectly inelastic.

Accepted Answer

The answer of Figure 5-20 
-Refer to Figure 5-20. Which...

Question 20

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then
A) consumers of wheat would buy more wheat.
B) wheat farmers would suffer a reduction in their total revenue.
C) wheat farmers would experience an increase in their total revenue.
D) the demand for wheat would decrease.

Accepted Answer

The answer of Knowing that the demand for wheat is...

Quiz 5: Elasticity and Its Application

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought. Which of the following best describes the effect on corn farmers in Minnesota, where sufficient rainfall occurred?

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will

How did the farm population in the United States change between 1950 and today?

Figure 5-20 -Refer to Figure 5-20. Which supply curve is most likely relevant over a very long period of time?

The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if the

Suppose that corn farmers want to increase their total revenue. Knowing that the demand for corn is inelastic, corn farmers should

A decrease in supply will cause the smallest increase in price when

A decrease in supply will cause the largest increase in price when

Between 1950 and today there was a

Good news for farming can be bad news for farmers because the

An advance in farm technology that results in an increased market supply is

There are fewer farmers in the United States today than 200 years ago because of

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

Farm programs that pay farmers not to plant crops on all their land

Figure 5-20 -Refer to Figure 5-20. Which supply curve represents perfectly inelastic supply?

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then