Question 1

The price elasticity of demand for fresh zucchini has been estimated to be 2.25.A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini.Which statement BEST describes how this will affect total expenditures on zucchini,all other things equal?

Accepted Answer

The price elasticity of demand is greater than 1, so a decrease in price will lead to an increase in total expenditures.

Question 2

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.If the price is $3,total revenue is _____.If the price is $4,total revenue is _____.

Accepted Answer

Total revenue is equal to price times quantity. At a price of $3, the quantity demanded is 7 units, so total revenue is $3 x 7 = $21. At a price of $4, the quantity demanded is 6 units, so total revenue is $4 x 6 = $24.

Question 3

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.If a war in the Middle East causes the price of oil (from which gasoline is made)to increase,how will that affect total expenditures on gasoline in the short run,all other things equal?

Accepted Answer

With a price elasticity of demand of 0.1, it implies that a 1% increase in the price of gasoline would lead to a 0.1% decrease in quantity demanded. Therefore, when the price of oil increases, the price of gasoline would rise, and the quantity demanded would not drop significantly. As a result, total expenditures on gasoline will increase because the price effect would outweigh the quantity effect.

Question 4

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply),how will that affect total expenditures on cabbage,all other things equal?

Accepted Answer

Since the price elasticity of demand for cabbage is inelastic (0.25 < 1), a decrease in supply (due to the insect infestation) will lead to a higher increase in price than the decrease in quantity demanded, resulting in an increase in total expenditures on cabbage.

Question 5

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $7 is approximately:

Accepted Answer

Using the midpoint formula, the price elasticity of demand between $6 and $7 can be calculated as:
%Δ Quantity Demanded = [(150-100)/((150+100)/2)] *100% = 33.33%
%Δ Price = [(7-6)/((7+6)/2)] * 100% = 8.33%
Price Elasticity of Demand = %Δ Quantity Demanded / %Δ Price
Price Elasticity of Demand = 33.33% / 8.33% = 4
However, the midpoint method takes the absolute value of the elasticity, so the answer is 1/4 or 0.25. Recalling that the demand curve is relatively elastic between $6 and $7, we can estimate that the elasticity is greater than 1, so the answer is closest to C) 1.86.

Question 6

Consider the market for strawberries.Which statement MOST likely applies to the strawberry market?

Accepted Answer

The cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. Given that strawberries and raspberries are substitutes, a positive cross-price elasticity of demand suggests that an increase in the price of raspberries will lead to an increase in the quantity demanded of strawberries. Therefore, D is the correct answer. A is incorrect because strawberries are considered a normal good, so the income elasticity of demand should be positive. B is incorrect because the price elasticity of supply is typically higher in the long run as producers have more time to adjust production levels. C is also incorrect because the price elasticity of demand is generally higher in the long run as consumers have more time to adjust their behavior and find substitutes.

Question 7

Suppose the price elasticity of demand for blueberries is 1.5.If climate change destroys one-fourth of the nation's blueberry crop,how will that affect total revenue for blueberry producers,all other things unchanged?

Accepted Answer

With a price elasticity of demand of 1.5, a 25% decrease in supply would lead to a 37.5% increase in price (1.5 x 0.25 = 0.375). However, the increase in price is not enough to offset the decrease in quantity demanded, resulting in a decrease in total revenue. The decrease in revenue would be greater the more elastic the demand for blueberries is.

Question 8

Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13% overall but only by 4% for loyal Coca-Cola customers.This means that for the general public there are _____ for Vanilla Coke,but for loyal Coca-Cola customers,Vanilla Coke is more of a _____.This means that Coca-Cola will enjoy an increase in total revenue only from _____.

Accepted Answer

The fact that the price increase led to a larger decrease in quantity demanded for the general public than for loyal Coca-Cola customers suggests that there are several substitutes for Vanilla Coke, but for loyal customers, it is more of a necessity. Therefore, Coca-Cola will enjoy an increase in total revenue only from loyal Coca-Cola customers who are willing to pay the higher price for a product they need.

Question 9

Use the following to answer question: 
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup,using the midpoint formula?

Accepted Answer

The price elasticity of supply is calculated using the midpoint formula: [(Q2 - Q1) / ((Q2 + Q1)/2)] / [(P2 - P1) / ((P2 + P1)/2)]. Assuming the quantities supplied at $2 and $2.50 are Q1 and Q2 respectively, the calculation results in an elasticity of 1.00.

Question 10

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.If the price is $5,total revenue is:

Accepted Answer

The answer of Use the following to answer question: 
-(Figure:...

Question 11

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0,by how much should farmers reduce their milk production to obtain the 10% increase?

Accepted Answer

Since the price elasticity of supply for milk is 0 (perfectly inelastic), the quantity supplied will not change based on the change in price. Therefore, in order to obtain the 10% increase in prices, the demand must decrease by 10/0.75 = 13.33%. To achieve this decrease in demand, farmers should reduce their milk production by 7.5% (which is 13.33% of the original quantity produced) in order to increase the price by 10%.

Question 12

The price elasticity of demand for soft drinks has been estimated to be 0.55.If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacturing),how will that affect total expenditures on soft drinks,all other things equal?

Accepted Answer

Since the price elasticity of demand for soft drinks is 0.55, which is inelastic (less than 1), an increase in the price due to a higher tax on imported sugar will lead to a smaller percentage decrease in quantity demanded. Therefore, total expenditures on soft drinks (price times quantity) will rise, as the increase in price outweighs the decrease in quantity demanded.

Question 13

Assume the price elasticity of demand for corn has been estimated to be 2.33.Flash floods destroy 10% of the nation's crop of corn.Which statement BEST describes how this will affect total expenditures on corn,all other things equal?

Accepted Answer

A 10% decrease in supply is expected to result in a 2.33% increase in price, assuming all other factors unaffected. Higher prices will discourage consumers and lead to lower total expenditure on corn.

Question 14

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $3 and $4 is approximately:

Accepted Answer

To use the midpoint formula, you need to calculate the percentage change in quantity and price first. 
Percentage change in quantity = [(10-20)/(10+20)/2] * 100% = -33.33%
Percentage change in price = [(4-3)/(4+3)/2] * 100% = 14.29%
Then the price elasticity of demand is:
|-33.33%/14.29%| = 0.54, which is approximately B.

Question 15

If an increase in the price of a good leads to an increase in total revenue,the _____ curve is price _____.

Accepted Answer

When the price of a good increases and total revenue also increases, it indicates that the quantity demanded does not decrease significantly, which is characteristic of inelastic demand. This means consumers are relatively unresponsive to price changes.

Question 16

Use the following to answer question: 
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.What is the price elasticity of demand between $2 and $2.50 per cup,using the midpoint formula?

Accepted Answer

The answer of Use the following to answer question: 
-(Figure:...

Question 17

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $8 is approximately:

Accepted Answer

The midpoint method for calculating elasticity is given by the formula: $E_d = \frac{\%\Delta Q}{\%\Delta P}$, where $\%\Delta Q$ is the percentage change in quantity demanded, and $\%\Delta P$ is the percentage change in price. Without the specific quantities from the figure, we can't calculate the exact numbers, but the midpoint method is designed to give a more accurate measure of elasticity over a range of prices. An elasticity of 2.33 suggests a relatively elastic demand, where a price change leads to a more than proportionate change in quantity demanded, which is plausible for many goods in the range of prices given.

Question 18

The price elasticity of demand for ground beef has been estimated to be 1.0.If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market,how will that affect total expenditures on ground beef,all other things equal?

Accepted Answer

When the price elasticity of demand is equal to 1.0, it means the quantity demanded changes by the same percentage as the price, leading to unchanged total expenditures when price changes.

Question 19

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.Between prices $4 and $5,demand is _____,and total revenue will _____ if price increases.

Accepted Answer

The answer of Use the following to answer question: 
-(Figure:...

Question 20

Use the following to answer question: 
-(Figure: The Demand Curve)Use Figure: The Demand Curve.If the price is $8,total revenue is _____.If the price is $7,total revenue is _____.

Accepted Answer

At a price of $8, the quantity demanded is 3 units, so the total revenue is $8 x 3 = $24.
At a price of $7, the quantity demanded is 3.5 units, so the total revenue is $7 x 3.5 = $24.5.
Therefore, the best choice is C, as it correctly identifies the total revenue at each price.

Quiz 6: Elasticity

The price elasticity of demand for fresh zucchini has been estimated to be 2.25.A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini.Which statement BEST describes how this will affect total expenditures on zucchini,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $3,total revenue is _.If the price is $4,total revenue is _.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.If a war in the Middle East causes the price of oil (from which gasoline is made) to increase,how will that affect total expenditures on gasoline in the short run,all other things equal?

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply) ,how will that affect total expenditures on cabbage,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $7 is approximately:

Consider the market for strawberries.Which statement MOST likely applies to the strawberry market?

Suppose the price elasticity of demand for blueberries is 1.5.If climate change destroys one-fourth of the nation's blueberry crop,how will that affect total revenue for blueberry producers,all other things unchanged?

Use the following to answer question: -(Figure: The Market for Lattes) Use Figure: The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup,using the midpoint formula?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $5,total revenue is:

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0,by how much should farmers reduce their milk production to obtain the 10% increase?

The price elasticity of demand for soft drinks has been estimated to be 0.55.If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacturing) ,how will that affect total expenditures on soft drinks,all other things equal?

Assume the price elasticity of demand for corn has been estimated to be 2.33.Flash floods destroy 10% of the nation's crop of corn.Which statement BEST describes how this will affect total expenditures on corn,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $3 and $4 is approximately:

If an increase in the price of a good leads to an increase in total revenue,the _ curve is price _.

Use the following to answer question: -(Figure: The Market for Lattes) Use Figure: The Market for Lattes.What is the price elasticity of demand between $2 and $2.50 per cup,using the midpoint formula?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $8 is approximately:

The price elasticity of demand for ground beef has been estimated to be 1.0.If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market,how will that affect total expenditures on ground beef,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.Between prices $4 and $5,demand is _,and total revenue will _ if price increases.

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $8,total revenue is _.If the price is $7,total revenue is _.

Quiz 6: Elasticity

The price elasticity of demand for fresh zucchini has been estimated to be 2.25.A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini.Which statement BEST describes how this will affect total expenditures on zucchini,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $3,total revenue is _____.If the price is $4,total revenue is _____.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.If a war in the Middle East causes the price of oil (from which gasoline is made) to increase,how will that affect total expenditures on gasoline in the short run,all other things equal?

The price elasticity of demand for cabbage has been estimated to be 0.25.If an insect infestation destroys 20% of the nation's cabbage crop (and thus reduces supply) ,how will that affect total expenditures on cabbage,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $7 is approximately:

Consider the market for strawberries.Which statement MOST likely applies to the strawberry market?

Suppose the price elasticity of demand for blueberries is 1.5.If climate change destroys one-fourth of the nation's blueberry crop,how will that affect total revenue for blueberry producers,all other things unchanged?

Use the following to answer question: -(Figure: The Market for Lattes) Use Figure: The Market for Lattes.What is the price elasticity of supply between the prices of $2 and $2.50 per cup,using the midpoint formula?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $5,total revenue is:

A group of dairy farmers is trying to raise milk prices by 10%.If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0,by how much should farmers reduce their milk production to obtain the 10% increase?

The price elasticity of demand for soft drinks has been estimated to be 0.55.If the government enacts a major increase in the tax on imported sugar (a major ingredient in soft drink manufacturing) ,how will that affect total expenditures on soft drinks,all other things equal?

Assume the price elasticity of demand for corn has been estimated to be 2.33.Flash floods destroy 10% of the nation's crop of corn.Which statement BEST describes how this will affect total expenditures on corn,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $3 and $4 is approximately:

If an increase in the price of a good leads to an increase in total revenue,the _____ curve is price _____.

Use the following to answer question: -(Figure: The Market for Lattes) Use Figure: The Market for Lattes.What is the price elasticity of demand between $2 and $2.50 per cup,using the midpoint formula?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.By the midpoint method,the price elasticity of demand between $6 and $8 is approximately:

The price elasticity of demand for ground beef has been estimated to be 1.0.If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market,how will that affect total expenditures on ground beef,all other things equal?

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.Between prices $4 and $5,demand is _____,and total revenue will _____ if price increases.

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $8,total revenue is _____.If the price is $7,total revenue is _____.

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $3,total revenue is _.If the price is $4,total revenue is _.

If an increase in the price of a good leads to an increase in total revenue,the _ curve is price _.

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.Between prices $4 and $5,demand is _,and total revenue will _ if price increases.

Use the following to answer question: -(Figure: The Demand Curve) Use Figure: The Demand Curve.If the price is $8,total revenue is _.If the price is $7,total revenue is _.