Question 1

A linear, upward-sloping supply curve has
A)a constant slope and a changing price elasticity of supply.
B)a changing slope and a constant price elasticity of supply.
C)both a constant slope and a constant price elasticity of supply.
D)both a changing slope and a changing price elasticity of supply.

Accepted Answer

A linear, upward-sloping supply curve has a constant slope, meaning that at every point along the curve, the change in quantity supplied is the same for every unit change in price. However, the price elasticity of supply changes along the curve because at the lower end, the quantity supplied is relatively fixed, making the supply curve more price inelastic, while at the higher end, the quantity supplied is more responsive to changes in price, making the supply curve more price elastic.

Question 2

Which of the following statements is correct?
A)Advocates for drug-interdiction policies that reduce the supply of illegal drugs argue that the demand for illegal drugs may be more responsive in the long run than in the short run.
B)The demand for illegal drugs is price inelastic.
C)Drug interdiction efforts that reduce the supply of illegal drugs may increase drug-related crimes.
D)All of the above are correct.

Accepted Answer

Reducing the supply of illegal drugs can lead to higher prices, potentially increasing drug-related crimes as users seek to afford the drugs. Demand may be more elastic in the long run as users find alternatives or quit.

Question 3

If the quantity supplied responds only slightly to changes in price, then
A)supply is said to be elastic.
B)supply is said to be inelastic.
C)an increase in price will not shift the supply curve very much.
D)even a large decrease in demand will change the equilibrium price only slightly.

Accepted Answer

If the quantity supplied responds only slightly to changes in price, then supply is said to be inelastic. This means that even if the price of a product increases, the quantity supplied does not increase by a proportional amount, leading to a relatively small shift in the supply curve.

Question 4

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?
A)Both Operation Methbust and Say No would reduce the equilibrium quantity and increase the equilibrium price of meth.
B)Both Operation Methbust and Say No would increase the equilibrium quantity and reduce the equilibrium price of meth.
C)Both Operation Methbust and Say No would reduce the equilibrium quantity of meth; Operation Methbust would increase the equilibrium price, whereas Say No would reduce the equilibrium price of meth.
D)Both Operation Methbust and Say No would reduce the equilibrium price of meth; Operation Methbust would reduce the equilibrium quantity, whereas Say No would increase the equilibrium quantity of meth.

Accepted Answer

Both Operation Methbust and Say No would reduce the overall supply of meth, decreasing the equilibrium quantity. However, the effects on the equilibrium price would differ.

Operation Methbust would increase the cost of producing and selling meth, as there would be an increased risk of getting caught and punished. This would shift the supply curve leftward, leading to a higher equilibrium price.

On the other hand, Operation Say No would reduce the demand for meth, as better education about its health risks would make potential users less willing to consume it. This would also shift the demand curve leftward, but would lead to a lower equilibrium price.

Thus, while both programs would have a similar effect on the quantity of meth in the market, they would have opposite effects on the price. Therefore, the correct choice is C.

Question 5

Which of the following statements about agriculture in the U.S. is correct?
A)From the 1950s to today, agricultural output has approximately doubled.
B)Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
C)Increasing the supply of agricultural products typically benefits consumers but harms farmers.
D)Technological improvements typically increase both supply and revenue for individual farmers.

Accepted Answer

The answer of Which of the following statements about agriculture...

Question 6

Which of the following statements about agriculture in the U.S. is correct?
A)Technological improvements typically increase both supply and revenue for individual farmers.
B)Technological improvements that increased supply, coupled with inelastic demand for foodstuffs, explain why the number of farmers has decreased dramatically over the last century.
C)Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
D)All of the above are correct.

Accepted Answer

The answer of Which of the following statements about agriculture...

Question 7

Which of the following statements about agriculture in the U.S. is not correct?
A)From the 1950s to today, agricultural output has increased about five times.
B)Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
C)Increasing the supply of agricultural products typically benefits consumers but harms farmers.
D)Technological improvements typically increase supply and decrease revenue for farmers.

Accepted Answer

This statement is incorrect because technological improvements generally increase the supply of products for which demand is inelastic, which can increase revenue for farmers.

Question 8

The price elasticity of supply measures how responsive
A)sellers are to a change in price.
B)sellers are to a change in buyers' income.
C)buyers are to a change in production costs.
D)equilibrium price is to a change in supply.

Accepted Answer

The price elasticity of supply measures how much the quantity supplied of a good or service responds to a change in price. This means that it measures the responsiveness of sellers to a change in price. Therefore, option A is the best choice. Options B, C, and D are incorrect as they refer to the responsiveness of buyers or equilibrium price, rather than sellers.

Question 9

A key determinant of the price elasticity of supply is the
A)time horizon.
B)income of consumers.
C)price elasticity of demand.
D)importance of the good in a consumer's budget.

Accepted Answer

The time horizon is a key determinant of the price elasticity of supply because in the short run, suppliers may not be able to adjust their production levels to changes in price, resulting in low elasticity. In the long run, however, they have more time to respond to price changes and can adjust their production levels, resulting in higher elasticity. Income of consumers, price elasticity of demand, and importance of the good in a consumer's budget are determinants of price elasticity of demand, not supply.

Question 10

A key determinant of the price elasticity of supply is
A)the ability of sellers to change the price of the good they produce.
B)the ability of sellers to change the amount of the good they produce.
C)how responsive buyers are to changes in sellers' prices.
D)the slope of the demand curve.

Accepted Answer

The key determinant of price elasticity of supply is the ability of sellers to change the amount of the good they produce in response to a change in price. If sellers can easily adjust their production levels when the price of a good changes, the supply is more elastic. If they cannot adjust production levels as easily, the supply is less elastic. The other options may be factors that affect the overall responsiveness of the market, but they are not the key determinant of supply elasticity.

Question 11

Drug-interdiction policies that reduce the supply of illegal drugs may
A)be more effective in the long run than in the short run.
B)be best coupled with drug-education programs designed to reduce demand.
C)increase drug-related crimes.
D)All of the above are correct.

Accepted Answer

The answer of Drug-interdiction policies that reduce the supply of...

Question 12

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program
A)and the education program will reduce the quantity of junk food sold and raise the price.
B)and the education program will reduce the quantity of junk food sold and lower the price.
C)will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.
D)will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

Accepted Answer

The junk-food ban program will reduce the quantity of junk food sold because it will no longer be available for production and sale. This decrease in supply will increase the price of junk food due to its scarcity. On the other hand, the education program will reduce the quantity of junk food sold by encouraging people to make healthier choices, which will lower the demand for junk food. This decrease in demand will lower the price of junk food. Therefore, the combination of both programs will reduce the quantity of junk food sold and raise the price for the banned items while reducing the quantity of junk food sold and lowering the price for the remaining items.

Question 13

A key determinant of the price elasticity of supply is the
A)number of close substitutes for the good in question.
B)extent to which buyers alter their quantities demanded in response to changes in prices.
C)length of the time period.
D)extent to which buyers alter their quantities demanded in response to changes in their incomes.

Accepted Answer

The length of the time period is a key determinant of the price elasticity of supply because in the short run, firms may not be able to quickly adjust their production levels in response to changes in price, resulting in a relatively inelastic supply. However, in the long run, firms can adjust their levels of production and inputs, resulting in a more elastic supply. The number of close substitutes (A) and buyers' responsiveness to changes in price and income (B and D) are determinants of price elasticity of demand, not supply.

Question 14

The federal government is concerned about the negative effects of cigarette smoking in the United States. Suppose Congress is considering two plans. One plan would limit the production of cigarettes. The other would require manufacturers to include graphic photos on cigarette packages of people suffering cancer's effects. Which of the following statements is true?
A)Both programs would increase the price of cigarettes.
B)Both programs would reduce the quantity of cigarettes sold.
C)Both programs would decrease revenues for cigarette manufacturers.
D)All of the above are correct.

Accepted Answer

Both plans would likely reduce the quantity of cigarettes sold, as limiting production would decrease the supply available for purchase, and graphic photos on packages would potentially deter some consumers from buying them. While both plans may increase the price of cigarettes and decrease revenues for manufacturers, these outcomes are not guaranteed for either plan.

Question 15

The price elasticity of supply measures how responsive
A)equilibrium price is to equilibrium quantity.
B)sellers are to a change in buyers' income.
C)sellers are to a change in price.
D)consumers are to the number of substitutes.

Accepted Answer

The price elasticity of supply measures how responsive sellers are to a change in price. It tells us how much the quantity supplied will change in response to a change in price. A high price elasticity of supply means that sellers are very responsive to price changes, while a low price elasticity of supply means that sellers are not very responsive to price changes.

Question 16

The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs. Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth. Assuming that each program were successful, which of the following statements is correct?
A)Both Operation Methbust and Say No would reduce the demand for meth.
B)Both Operation Methbust and Say No would reduce the supply of meth.
C)Operation Methbust would reduce the demand for meth; Operation Say No would reduce the supply of meth.
D)Operation Methbust would reduce the supply of meth; Operation Say No would reduce the demand for meth.

Accepted Answer

Operation Methbust, which increases the number of sheriffs' deputies to search out and destroy methamphetamine labs, would directly target the supply of meth by reducing the number of labs producing the drug. Operation Say No, which increases the training required for public school teachers to educate students, may indirectly reduce the demand for meth by educating young people about the risks associated with using the drug. However, the primary focus of this program is to reduce the supply of meth by reducing the number of people who become addicted to it in the first place. Therefore, the best answer is D, as both programs target different aspects of the problem and would work together to combat the production and use of meth.

Question 17

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in
A)higher prices and higher total revenue from marijuana sales.
B)higher prices but lower total revenue from marijuana sales.
C)the same price and higher total revenue from marijuana sales.
D)the same price but lower total revenue from marijuana sales.

Accepted Answer

When demand is inelastic and supply is perfectly elastic, an increase in demand leads to a higher quantity sold at the same price, resulting in higher total revenue.

Question 18

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?
A)Supply curves are steeper over long periods of time than over short periods of time.
B)Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time.
C)The number of firms in a market tends to be more variable over long periods of time than over short periods of time.
D)Firms prefer to change their prices in the short run rather than in the long run.

Accepted Answer

The answer of A key determinant of the price elasticity...

Question 19

OPEC has coordinated a reduction in supply that was
A)effective in insulating the members from the decrease in demand in the late 2000s.
B)more profitable in the long run than in the short run.
C)profitable in both the short run and the long run.
D)more profitable in the short run than in the long run.

Accepted Answer

The coordinated reduction in supply by OPEC was more profitable in the short run than in the long run. In the short run, the reduction in supply led to an increase in oil prices and thus higher profits for OPEC members. However, in the long run, the reduction in supply could lead to the development of alternative energy sources and a decrease in demand for oil, which could harm the profits of OPEC members in the future.

Question 20

Drug-interdiction policies that reduce the supply of illegal drugs
A)are likely to be more effective in the short run than in the long run.
B)are proven to reduce illegal drug use faster than drug-education programs designed to reduce demand.
C)may increase drug-related crimes.
D)All of the above are correct.

Accepted Answer

Drug-interdiction policies that focus solely on reducing the supply of illegal drugs may lead to higher prices for these drugs, which can increase drug-related crimes such as theft and violence. Additionally, these policies often do not target the root causes of drug use and may not be effective in the long run. Drug-education programs that focus on reducing demand and addressing underlying issues such as addiction and mental health may be more effective in the long term.

Quiz 5: Elasticity and Its Application

A linear, upward-sloping supply curve has

Which of the following statements is correct?

If the quantity supplied responds only slightly to changes in price, then

Which of the following statements about agriculture in the U.S. is correct?

Which of the following statements about agriculture in the U.S. is correct?

Which of the following statements about agriculture in the U.S. is not correct?

The price elasticity of supply measures how responsive

A key determinant of the price elasticity of supply is the

A key determinant of the price elasticity of supply is

Drug-interdiction policies that reduce the supply of illegal drugs may

A key determinant of the price elasticity of supply is the

The price elasticity of supply measures how responsive

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

OPEC has coordinated a reduction in supply that was

Drug-interdiction policies that reduce the supply of illegal drugs