Question 1

Scenario 5-3
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 5-3. Total consumer spending on aged cheddar cheese will
A)increase, and total consumer spending on bread will increase.
B)increase, and total consumer spending on bread will decrease.
C)decrease, and total consumer spending on bread will increase.
D)decrease, and total consumer spending on bread will decrease.

Accepted Answer

Since both goods are normal goods, a decrease in income would decrease the demand for both goods. However, since the supply of aged cheddar cheese is inelastic, the decrease in demand for the cheese would not result in a significant decrease in price, leading to a decrease in total consumer spending on aged cheddar cheese. On the other hand, since the supply of bread is elastic, the decrease in demand for bread would result in a decrease in price, leading to a decrease in total consumer spending on bread. Therefore, total consumer spending on both goods would decrease.

Question 2

Scenario 5-3
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 5-3. 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

Since the supply of aged cheddar cheese is inelastic, a decrease in demand will result in a larger decrease in quantity demanded, leading to a greater decrease in equilibrium price. On the other hand, the supply of bread is elastic, so a decrease in demand will have a smaller effect on equilibrium price. Therefore, the change in equilibrium price will be greater in the aged cheddar cheese market than in the bread market.

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

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 5

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 6

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

The severe drought in Wisconsin would lead to a decrease in the supply of corn, causing the price of corn to increase. As a result, the demand for corn would be inelastic in Minnesota, meaning that consumers would still buy corn even if the price increased. This would result in an increase in revenue for corn farmers in Minnesota.

Question 7

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 enabled farmers to produce more crops with less labor. This has led to consolidation of farms and fewer farmers overall.

Question 8

Scenario 5-4
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-4. The change in equilibrium price will be
A)greater in the milk market than in the beef market.
B)greater in the beef market than in the milk market.
C)the same in the milk and beef markets.
D)Any of the above could be correct.

Accepted Answer

The answer of Scenario 5-4
Milk has an inelastic demand, and...

Question 9

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 10

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

The answer of How did the farm population in the...

Question 11

Scenario 5-3
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 5-3. 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

Since the demand for both goods decreased by the same percentage, the equilibrium quantity for both goods will also decrease. However, since the supply of aged cheddar cheese is inelastic, the decrease in demand will have a larger effect on the price of aged cheddar cheese than on the quantity. Therefore, the price of aged cheddar cheese will increase while the quantity decreases. On the other hand, the supply of bread being elastic, the decrease in demand will have a larger effect on the quantity of bread than on the price. Therefore, the price of bread will decrease while the quantity decreases.

Question 12

Scenario 5-4
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-4. The change in equilibrium quantity will be
A)greater in the milk market than in the beef market.
B)greater in the beef market than in the milk market.
C)the same in the milk and beef markets.
D)Any of the above could be correct.

Accepted Answer

Since milk has an inelastic demand, the decrease in supply due to the decrease in dairy cows will lead to a greater increase in equilibrium price than in equilibrium quantity. On the other hand, beef has an elastic demand, meaning a decrease in supply will lead to a greater increase in equilibrium quantity than in equilibrium price. Therefore, the change in equilibrium quantity will be greater in the beef market than in the milk market.

Question 13

Scenario 5-3
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 5-3. 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 5-3
The supply of aged cheddar cheese...

Question 14

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 15

Between 1950 and today there was a
A)20 percent drop in the number of farmers, but farm output increased by more than ten times.
B)30 percent drop in the number of farmers, but farm output more than tripled.
C)40 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 increased by about five times.

Accepted Answer

The answer of Between 1950 and today there was a
A)20...

Question 16

Scenario 5-3
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 5-3. The change in equilibrium quantity 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 change in equilibrium quantity will be greater in the bread market than in the aged cheddar cheese market. This is because bread has an elastic supply, meaning that producers can increase production quickly in response to changes in demand, while aged cheddar cheese has an inelastic supply, meaning that it is difficult for producers to quickly increase production in response to changes in demand. Thus, the decrease in demand will have a greater impact on the bread market, causing a larger decrease in equilibrium quantity.

Question 17

Scenario 5-4
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-4. The equilibrium quantity will
A)increase in both the milk and beef markets.
B)increase in the milk market and decrease in the beef market.
C)decrease in the milk market and increase in the beef market.
D)decrease in both the milk and beef markets.

Accepted Answer

The answer of Scenario 5-4
Milk has an inelastic demand, and...

Question 18

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...

Question 19

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 of basic foodstuffs increases, the total revenue that farmers receive may actually decrease because the demand for these goods is usually inelastic. This means that a change in supply will lead to a proportionally smaller change in price, causing total revenue to decrease. Therefore, good news for farming (i.e. an increase in supply) can actually be bad news for farmers if the demand remains inelastic.

Question 20

Scenario 5-4
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent.
-Refer to Scenario 5-4. The equilibrium price will
A)increase in both the milk and beef markets.
B)increase in the milk market and decrease in the beef market.
C)decrease in the milk market and increase in the beef market.
D)decrease in both the milk and beef markets.

Accepted Answer

The answer of Scenario 5-4
Milk has an inelastic demand, and...

Quiz 5: Elasticity and Its Application

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

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

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

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?

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

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The change in equilibrium price will be

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

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

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The change in equilibrium quantity will be

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

Between 1950 and today there was a

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The equilibrium quantity will

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

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

Scenario 5-4 Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. -Refer to Scenario 5-4. The equilibrium price will