Exam 3: Applying the Supply and Demand Model

Suppose the demand curve for movie tickets has unitary price elasticity and the supply curve is perfectly price elastic.If 3 million tickets are currently sold at a price of $5,approximately how much tax revenue could the government generate from a $1 specific tax?

As the supply curve shifts to the right,the increase in quantity demanded will not depend on the shape of the demand curve.

Suppose the inverse demand curve for a good is expressed as Q = 50 - 2p.If the good currently sells for $3,then the price elasticity of demand is

The number of vehicle types available in the United States has increased dramatically over the past thirty years.Everything else equal,this would make

If the demand curve for orange juice is expressed as Q = 2000 - 500p,where Q is measured in gallons and p is measured in dollars,then at the price of $3,elasticity equals

To prevent obesity,the government may establish a tax on high caloric foods,such as twinkies.A twinkie tax will have the smallest impact on quantity demanded when the demand curve for twinkies is

The National Association of Business Schools recently required that all business schools must hire three additional people with Ph.D.degrees in English literature.What is the immediate effect on the salaries of people with Ph.D.s in English literature? What will be the effect after ten years?

An agricultural corn market faces a positive supply shock due to a beneficial rainy season and the use of new genetically modified seeds.As a result,farmers face the largest crop harvest in decades.Which answer below explains how a farm could actually go bankrupt under this scenario.

If a consumer doubles her quantity of ice cream consumed when her income rises by 25%,then her income elasticity of demand for ice cream is

Which of the following is most likely to be true?

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

Suppose the market for grass seed is expressed as Demand: Q^D = 100 - 2p Supply: Q^S = 3p Price elasticity of supply is constant at 1.If the supply curve is changed to Q = 8p,price elasticity of supply is still constant at 1.Yet,with the new supply curve,consumers pay a larger share of a specific tax.Why?

The government heavily subsidizes the production of ethanol to encourage the purchase of ethanol over oil,a less environmentally friendly form of energy.Given that the supply elasticity of ethanol,η,is estimated to be about 0.13,what would the elasticity of demand,ε,have to be for consumers to receive at least half of the subsidy,and therefore encourage ethanol consumption?

As more people quit smoking in the United States,what is expected to happen to the price elasticity of supply of cigarettes?

The rising price of oil has made it feasible to extract oil out of oily sand in Canada.Concerning the oil market this is an example of

Why is the supply of oil more price elastic in the long run?

Electricity accounts for almost 20% of the cost of making steel.A 10% increase in electricity prices results in steel firms decreasing production and thereby demanding 5% less electricity.Over many years,technological innovations can change the way steel firms make steel and reduce the industry's energy requirements.This suggests that the steel industry's short-run elasticity of demand for electricity is probably

If a one percent increase in the population leads to a five percent increase in the quantity sold,an economist would claim

The current price floor in the agricultural lettuce market makes it such that price of lettuce is 25% higher than equilibrium price and 100 heads of lettuce are demanded.Assuming that the elasticity of demand for lettuce is -0.50,what would be the equilibrium price and quantity of lettuce if the government removed the current price floor?

In the case of a specific tax the resulting price received by producers depends on