Question 1

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Accepted 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. 
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. A

Question 2

Farm programs that pay farmers not to plant crops on all their land

Accepted Answer

A) hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B) help farmers by cutting costs,which helps consumers by lowering food prices. 
C) help farmers by increasing total revenue in the market but hurt consumers by raising food prices. 
D) help farmers directly since they receive government payments but have no real effects on consumers. 
A) hurt farmers by lowering their total revenue and hurt consumers by causing shortages of some food items. 
B) help farmers by cutting costs,which helps consumers by lowering food prices. 
C) help farmers by increasing total revenue in the market but hurt consumers by raising food prices. 
D) help farmers directly since they receive government payments but have no real effects on consumers. C

Question 3

Which of the following was not a reason OPEC failed to keep the price of oil high?

Accepted Answer

A) Over the long run,producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted. 
A) Over the long run,producers of oil outside of OPEC responded to higher prices by increasing oil exploration and by building new extraction capacity. 
B) Consumers responded to higher prices with greater conservation. 
C) Consumers replaced old inefficient cars with newer efficient ones. 
D) The agreement OPEC members signed allowed each country to produce as much oil as each wanted. D

Question 4

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

Accepted 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. 
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.

Question 5

In the early 1970s,OPEC's goal was to

Accepted Answer

A) decrease the world-wide price of oil so that the quantity demanded increased,thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied,thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased. 
A) decrease the world-wide price of oil so that the quantity demanded increased,thus raising total revenues for OPEC members. 
B) increase the world-wide price of oil by reducing the quantity of oil supplied. 
C) increase the world-wide price of oil by increasing the quantity of oil supplied,thus raising total revenues for OPEC members. 
D) decrease the world-wide price of oil so that quantity demanded increased.

Question 6

Scenario 5-3
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%.
-Refer to Scenario 5-3.The equilibrium price will

Accepted Answer

A) increase in both the aged cheddar cheese and bread markets. 
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 both the aged cheddar cheese and bread markets. 
A) increase in both the aged cheddar cheese and bread markets. 
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 both the aged cheddar cheese and bread markets.

Question 7

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought.Which of the following best describes the effect on corn farmers in Minnesota,where sufficient rainfall occurred?

Accepted Answer

A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic. 
A) Their revenue increases because price increases and demand is elastic. 
B) Their revenue increases because price increases and demand is inelastic. 
C) Their revenue decreases because price decreases and demand is inelastic. 
D) Their revenue decreases because price increases and demand is elastic.

Question 8

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

Accepted 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 on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production. 
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 on which they plant corn. 
D) contribute to a fund that promotes technological advances in corn production.

Question 9

The federal government is concerned about obesity in the United States.Congress is considering two plans.One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits.The junk-food ban program

Accepted Answer

A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price.The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price.The education program will reduce the quantity of junk food sold and raise the price. 
A) and the education program will reduce the quantity of junk food sold and raise the price. 
B) and the education program will reduce the quantity of junk food sold and lower the price. 
C) will reduce the quantity of junk food sold and raise the price.The education program will reduce the quantity of junk food sold and lower the price. 
D) will reduce the quantity of junk food sold and lower the price.The education program will reduce the quantity of junk food sold and raise the price.

Question 10

If soybean farmers know that the demand for soybeans is inelastic,in order to increase their total revenues they should

Accepted Answer

A) use more fertilizers and weed killers to increase their yields. 
B) plant additional acres to increase their output. 
C) reduce the number of acres they plant to decrease their output. 
D) Both a and b are correct. 
A) use more fertilizers and weed killers to increase their yields. 
B) plant additional acres to increase their output. 
C) reduce the number of acres they plant to decrease their output. 
D) Both a and b are correct.

Question 11

In the market for oil in the short run,demand

Accepted 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. 
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.

Question 12

Why was OPEC unable to maintain high oil prices in the long run?

Accepted Answer

A) Demand and supply are both elastic in the long run compared to the short run. 
B) Demand and supply are both inelastic in the long run compared to the short run. 
C) Demand is elastic and supply is inelastic in the long run compared to the short run. 
D) Demand is inelastic and supply is elastic in the long run compared to the short run. 
A) Demand and supply are both elastic in the long run compared to the short run. 
B) Demand and supply are both inelastic in the long run compared to the short run. 
C) Demand is elastic and supply is inelastic in the long run compared to the short run. 
D) Demand is inelastic and supply is elastic in the long run compared to the short run.

Question 13

Scenario 5-4
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.
-Refer to Scenario 5-4.The equilibrium price will

Accepted Answer

A) increase in both the milk and beef markets. 
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 both the milk and beef markets. 
A) increase in both the milk and beef markets. 
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 both the milk and beef markets.

Question 14

Between 1950 and today there was a

Accepted Answer

A) 20 percent drop in the number of farmers,but farm output increased by more than ten times. 
B) 30 percent drop in the number of farmers,but farm output more than tripled. 
C) 40 percent drop in the number of farmers,but farm output more than doubled. 
D) 70 percent drop in the number of farmers,but farm output increased by about five times. 
A) 20 percent drop in the number of farmers,but farm output increased by more than ten times. 
B) 30 percent drop in the number of farmers,but farm output more than tripled. 
C) 40 percent drop in the number of farmers,but farm output more than doubled. 
D) 70 percent drop in the number of farmers,but farm output increased by about five times.

Question 15

Scenario 5-5
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.
-Refer to Scenario 5-5.What would we expect to observe in the caviar market?

Accepted 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. 
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.

Question 16

Scenario 5-4
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.
-Refer to Scenario 5-4.The change in equilibrium price will be

Accepted 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) Any of the above could be correct. 
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) Any of the above could be correct.

Question 17

The production of methamphetamine (meth)is a social problem in the Midwest.Iowa is considering two potential programs: Operation Methbust would increase the number of sheriffs' deputies to search out and destroy methamphetamine labs.Operation Say No to Meth would increase the training required of public school teachers so that they could better educate students about the health risks of using meth.Assuming that each program were successful,which of the following statements is correct?

Accepted Answer

A) Both Operation Methbust and Say No would reduce the demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth;Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth;Operation Say No would reduce the demand for meth. 
A) Both Operation Methbust and Say No would reduce the demand for meth. 
B) Both Operation Methbust and Say No would reduce the supply of meth. 
C) Operation Methbust would reduce the demand for meth;Operation Say No would reduce the supply of meth. 
D) Operation Methbust would reduce the supply of meth;Operation Say No would reduce the demand for meth.

Question 18

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Accepted 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. 
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.

Question 19

Drug-interdiction policies that reduce the supply of illegal drugs

Accepted Answer

A) are likely to be more effective in the short run than in the long run. 
B) are proven to reduce illegal drug use faster than drug-education programs designed to reduce demand. 
C) may increase drug-related crimes. 
D) All of the above are correct. 
A) are likely to be more effective in the short run than in the long run. 
B) are proven to reduce illegal drug use faster than drug-education programs designed to reduce demand. 
C) may increase drug-related crimes. 
D) All of the above are correct.

Question 20

Scenario 5-3
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%.
-Refer to Scenario 5-3.The equilibrium quantity will

Accepted Answer

A) increase in both the aged cheddar cheese and bread markets. 
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 both the aged cheddar cheese and bread markets. 
A) increase in both the aged cheddar cheese and bread markets. 
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 both the aged cheddar cheese and bread markets.

Exam 5:Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

OPEC successfully raised the world price of oil in the 1970s and early 1980s,primarily due to

Farm programs that pay farmers not to plant crops on all their land

Which of the following was not a reason OPEC failed to keep the price of oil high?

Knowing that the demand for wheat is inelastic,if all farmers voluntarily did not plant wheat on 10 percent of their land,then

In the early 1970s,OPEC's goal was to

A recent news report lamented the plight of corn farmers in Wisconsin due to a severe drought.Which of the following best describes the effect on corn farmers in Minnesota,where sufficient rainfall occurred?

Suppose that corn farmers want to increase their total revenue.Knowing that the demand for corn is inelastic,corn farmers should

If soybean farmers know that the demand for soybeans is inelastic,in order to increase their total revenues they should

In the market for oil in the short run,demand

Why was OPEC unable to maintain high oil prices in the long run?

Scenario 5-4 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. -Refer to Scenario 5-4.The equilibrium price will

Between 1950 and today there was a

Scenario 5-4 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. -Refer to Scenario 5-4.The change in equilibrium price will be

Given the market for illegal drugs,when the government is successful in reducing the flow of drugs into the United States,

Drug-interdiction policies that reduce the supply of illegal drugs

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income

Measuring a Nations Income: The Economy's Income and Expenditure

Measuring a Nations Income: The Measurement of GDP

Measuring a Nations Income: The Components of GDP