Suppose that an increase in the price of carrots from 200 to 300 per kilogram

# Suppose that an increase in the price of carrots from

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22. Suppose that an increase in the price of carrots from \$2.00 to \$3.00 per kilogram raises the amount of carrots that carrot farmers produce from 2 million kilograms to 4 million kilograms. Using the midpoint method, what would be the elasticity of supply? a. 1.66 b. 0.54 c. 1.65 d. 2.00

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RODALA ARANYA ECON 1001 A 23. Suppose a tax is imposed on the sellers of a product. On whom will the burden of the tax fall? 24. Refer to Figure 1-5. What is share of tax burden per unit that buyers will have to pay? 25. Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, by what amount will the combined output for the two countries increase? Figure 1-5
RODALA ARANYA ECON 1001 A 26. What will happen to the equilibrium price and quantity of gasoline if more vehicles are used and, at the same time, the extraction of oil becomes more costly? a. price will fall and the effect on quantity is ambiguous b. price will rise and the effect on quantity is ambiguous c. quantity will fall and the effect on price is ambiguous d. quantity will rise and the effect on price is ambiguous 27. Suppose that you are in charge of pricing at a local flower shop. The business needs to increase revenue and your job is on the line. What should you do? 28. Which of the following categories of good would have the most inelastic demand? 29. Assume that a 10% increase in income results in an 8% decrease in the quantity demanded of a good. What is the income elasticity of demand for the good, and what type of good is it? 30. Cody rents five movies per month when the price is \$3.00 each and seven movies per month when the price is \$2.50. What has Cody demonstrated? a. law of price b. law of supply c. law of incentives d. law of demand

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