Macro assignment 5
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Macro assignment 5

Course: ECON 1901, Spring 2011

School: Temple

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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....

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1 Scenario Question 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 Register to View Answer 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 Register to View Answer 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. Register to View Answer 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 Register to View Answer 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. 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 the milk market and decrease in the beef market. 10 points Register to View Answer Question 7 7. Refer to Scenario 5-3. The equilibrium quantity will Answer a. increase in the milk market and increase in the beef market. 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 the milk market and decrease in the beef market. 10 points Register to View Answer Question 8 8. Refer to Scenario 5-3. The change in equilibrium price will be Answer 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. may be greater in either the milk market or the beef market. 10 points Register to View Answer Question 9 9. Refer to Scenario 5-3. The change in equilibrium quantity will be Answer 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. may be greater in either the milk market or the beef market. 10 points Register to View Answer Question 10 10. Refer to Scenario 5-3. Total consumer spending on milk will Answer a. increase, and total consumer spending on beef will increase. b. increase, and total consumer spending on beef will decrease. c. decrease, and total consumer spending on beef will increase. d. decrease, and total consumer spending on beef will decrease. 10 points Register to View Answer Question 11 11. 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 Answer a. the supply of wheat is elastic. b. the supply of wheat is inelastic. c. the demand for wheat is inelastic. d. the demand for wheat is elastic. 10 points Register to View Answer Question 12 12. Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to Answer 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. 10 points Register to View Answer Question 13 13. Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then Answer 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. 10 points Register to View Answer Question 14 14. If corn farmers know that the demand for corn is inelastic, and they want to increase their total revenue, they should all Answer 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 they plant in corn. d. contribute to a fund that promotes technological in advances corn production. 10 points Register to View Answer Question 15 15. If the demand for corn is inelastic, an advance in farm technology results in an increased market supply is Answer 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. 10 points Register to View Answer Question 16 16. OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to Answer a. an inelastic demand for oil and a reduction in the amount of oil supplied. b. a reduction in the amount of oil supplied and a world-wide oil embargo. c. a world-wide oil embargo and an elastic demand for oil. d. a reduction in the amount of oil supplied and an elastic demand for oil. 10 points Register to View Answer Question 17 17. In the market for oil in the short run, demand Answer a. and supply are both elastic. b. and supply are both inelastic. c. is elastic and supply is inelastic. d. is inelastic and supply is elastic. 10 points Register to View Answer Question 18 18. A decrease in supply will cause the largest increase in price when Answer 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. 10 points Register to View Answer Question 19 19. A decrease in supply will cause the smallest increase in price when Answer a. both supply and demand are inelastic. b. demand is elastic and supply is inelastic. c. both supply and demand are elastic. 10 points Register to View Answer Question 20 20. Which of the following statements does not help to explain why government drug interdiction increases drug-related crime? Answer a. The demand for illegal drugs is inelastic. b. Interdiction results in drug addicts having a greater need for quick cash. c. Interdiction results in an increase in the amount of money needed to buy the same amount of drugs. d. Government drug programs are more lenient now with drug offenders than they were in the 1980s. 10 points Register to View Answer Question 21 21. Which of the following statements helps to explain why government drug interdiction increases drugrelated crime? Answer a. The direct impact is on buyers, not sellers. b. Successful drug interdiction policies reduce the demand for illegal drugs. c. Drug addicts will have an even greater need for quick cash to support their habits. d. In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs. 10 points Register to View Answer Question 22 22. Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Answer a. Drug interdiction raises prices and total revenue in the drug market. b. Drug interdiction can increase drug-related crime. c. Drug interdiction shifts the demand curve for drugs to the left. d. Drug interdiction shifts the supply curve of drugs to the left. 10 points Register to View Answer Question 23 23. Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States, Answer a. supply decreases, demand is unaffected, and price increases. b. demand decreases, supply is unaffected, and price decreases. c. demand and supply both decrease, leaving price essentially unchanged. d. supply decreases, demand increases, and price increases substantially as a result. 10 points Register to View Answer Question 24 24. If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the Answer a. supply for marijuana is elastic. b. demand for marijuana is elastic. c. supply for marijuana is inelastic. d. demand for marijuana is inelastic. 10 points Register to View Answer Question 25 25. Under which of the following conditions would the interdiction of illegal drugs result in a decrease in the quantity of drugs sold and in a decrease in total spending on illegal drugs by drug users? Answer a. The interdiction has the effect of shifting the demand curve for illegal drugs to the right. b. The price elasticity of demand for illegal drugs is 1.3. c. The price elasticity of supply for illegal drugs is 0.8. d. As a result of the interdiction, the price of illegal drugs increases by 20 percent and the quantity of illegal drugs sold decreases by 16 percent. 10 points Register to View Answer Question 26 26. Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar. What would we expect to observe in the caviar market? Answer a. Equilibrium prices and quantities will increase. b. Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. c. Total revenues to caviar firms will increase if the demand for caviar is inelastic. d. All of the above are correct. Register to View Answer

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