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Question 1 Scenario 5-2 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%. 1. Refer to Scenario 5-2. The equilibrium price will Answer a. increase in the aged cheddar cheese market and increase in the bread market. 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 the aged cheddar cheese market and decrease in the bread market. 10 points Answer: A Question 2 2. Refer to Scenario 5-2. The equilibrium quantity will Answer a. increase in the aged cheddar cheese market and increase in the bread market. 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 the aged cheddar cheese market and decrease in the bread market. 10 points Answer: B Question 3 3. Refer to Scenario 5-2. The change in equilibrium price will be Answer 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. may be greater in either the aged cheddar cheese market or the bread market. Answer: B Question 4 4. Refer to Scenario 5-2. The change in equilibrium quantity will be Answer 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. may be greater in either the aged cheddar cheese market or the bread market. 10 points Answer: B Question 5 5. Refer to Scenario 5-2. Total consumer spending on aged cheddar cheese will Answer 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. 10 points Question 6 Scenario 5-3 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. 6. Refer to Scenario 5-3. The equilibrium price will Answer a. increase in the milk market and increase in the beef market.... View Full Document

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