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Unformatted text preview: AEC 305 Exam II Fall 2006 Name ________________________________________ Each answer is worth 4 points, except where noted 1. Briefly indicate and illustrate how each of the following events would affect the U.S supply for tobacco AND whether it would be represented as a movement along a given supply curve for tobacco, a shift in the supply curve for tobacco, or have no affect on the supply curve for tobacco. Clearly label your graphs. a. A 10% increase in contract grower prices. b. An early frost that destroys 5% of the crop. c. Smoking bans and restrictions. 2. Answer the following questions. a. Define the price elasticity of supply. b. Assume the price elasticity of supply for peanuts in the short-run is 0.25. Based on this elasticity, how much of an expected price increase would be necessary to entice peanut growers to increase the quantity supplied by 2%, holding all other factors constant? c. Identify two factors that could affect the short-run elasticity of supply for peanuts. d. Assume an analysis of the peanut market reveals that the marketing margin for peanuts is 50 cents per pound. What does that mean? Multiple Choice: Circle the correct answer....
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- Fall '08