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Exam 3: Applying the Supply-And-Demand Model

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Question 1

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If the price of orange juice rises 10%,and as a result the quantity demanded falls by 8%,the price elasticity of demand for orange juice is

A) -1.25.
B) -80.0.
C) -0.80.
D) -10.0.

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Question 2

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The market demand for wheat is Q = 100 - 2p + 1p_b,where p_b is the price of barley.The cross price elasticity of demand for wheat with respect to barley

A) cannot be calculated from just the information provided.
B) is negative.
C) suggests that wheat and barley are complements.
D) equals 1.

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Question 3

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If the price of orange juice rises 10%,and as a result the quantity demanded falls by 8%,the price elasticity of demand for orange juice is

If the demand function for orange juice is expressed as Q = 2000 - 500p,where Q is quantity in gallons and p is price per gallon measured in dollars,then the demand for orange juice has a unitary elasticity when price equals

-The above figure shows the demand curve for crude oil.Suppose the price is currently $15.A supply shock suddenly raises the price to $17.What happens with the crude oil sales revenue?

If a linear supply curve has a zero intercept,the elasticity of supply is always unitary.

Government revenue from an excise tax of a given amount is greater when demand is relatively inelastic than when it is relatively elastic.

The market demand for wheat is Q = 100 - 2p + 1p_b,where p_b is the price of barley.If the price of wheat is $2,the price elasticity of demand

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

Explain why the price elasticity of demand changes along a linear demand curve.

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

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.

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?

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

A specific tax on sellers will

Consider the following products.Which of them has the flattest demand curve?

If the demand curve for comic books is expressed as Q = 10,000/p,then demand has a unitary elasticity

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

In the late 1980s,the health benefits of oat bran were widely advertised.If the price of oats increased 50%,causing the quantity of oats supplied to increase by 40%,then the price elasticity of supply was

Explain why the shape of the demand curve will determine how a shock to the market equilibrium affects price and quantity.