Post-Lecture Quiz 03 1. Consider the market for crocks. A2 percent increase in price causes a 12 percent decrease in quantity demanded, Which ofthe following statements is mostlikely tobe applicable to crocks? |. There are no clase substitutes for crock, Il, Crocks are luxury goods. II The matket for cracks is broadly defined, (marks You scored 1/1 mark and 4.0, and i tony. © only and I, & General comments Is demand for cracks elastic, inelastic, or unit elastic? What are the characteristics of goods with elastie/nelastic/unit elastic demand? 2. Suppose Popeye's income elasticity of demand for spinach is 0.35. I Popeye's income rises by 10 percent, then (mark You scored 1/1 mark there will be a movement up and tothe left along the demand curve for spinach, the demand curve for spinach will shift to the let there will be a movement down and to the right on the demand curve for spinach © the quantity of spinach demanded wil se by 35 percent. the quantity of spinach demanded will rise by 35 percent. & General comments ‘As income changes, how does the quantity demanded of spinach change?3, If aprice decrease results in no change inthe sellers total revenue, then mar @ You scored 1/1 mark demands elastic demands inelastic. supply is unresponsive to demand supply determined demand © demand is unitary elastic. (© General comments \Write the formula for total revenue. If price decreases and total revenue is unchanged, then, ‘4, Suppose that a local grocery store sells apples and oranges for $1.00 apiece. At these prices, the store is able to sell $0 apples and 100 oranges per week. One week, te store lowered the price per apple to $0.90 and sold 5S apples. The next week, the store lowered the price peer orange to $0.90 (after raising the price per apple back to $1.00) and sold 110 oranges. These results imply that (mark You scored 1/1 mark the pice elestcity of demand of aplesis higher than the price elasticity of demand of oranges the supply of apples and the supply af oranges are equally price sensve the supply of oranges is more pice sensitive than the supply of apples. the supply of apples is mare price sensitive than the supply of oranges. the price elastcly of demand of apples fs lower than the price elastic of demand of oranges. © the price elasticities of demand of apples and of oranges are the same over these price ranges. & General comments Depict the prices and quantities of apples in one table, and the prices and quantities of oranges in anather table. As the price of apples changes, how does the quantity sold change? As the price of oranges changes, how does the quantity sold change?Inefficiency exists in an economy when a good is |. not produced because buyers do not value it very highly. |i. not being consumed by buyers who value it most highly I, not being produced by the lowest-cost producers. IV, being produced with less than all available resources. ~) vou scored 4/1 mark Won 1 and iv. © tana Land 1 and i @& General comments ‘When is surplus maximized? Inthe 1990s, reformers went to Sudan to buy slaves and set them free. What happened to the price elasticity ofthe supply of slaves aver time? (1 mark) You scored 1/1 mark ‘There was no change in the price elasticity of he supply of slaves over time. ‘The supply ofslaves became more price inelastic overtime. ©) The supply of slaves became more price elastic over time. General comments ‘Watch the video "Application - Elasticity and Slave Redemption.”7. Inthe 1990s, reformers went to Sudan to buy slaves and set them free, What happened to the demand curve and the supply curve in the market for slaves? (1 mark) You scored 1/1 mark ‘The demand curve shifted left ‘The supply curve shifted right. © The demand curve shifted right. ‘The supply curve shifted left, & General comments ‘Watch the video "Application - Elasticity and Slave Redemption, 8, We expect the cross-price elasticity of demand between two different brands of olive oll to be mo @ You scored /4 mark © positive with a high absolute value. Negative with 3 high absolute value. negative with a low absolute value poskive with a low absolute value. & General comments ‘As the price of one brand of olive oll changes, how does the quantity demanded of the other brand of olive oll change?Consider the following table on the number of labor hours required to produce a ton of coffee beans and a ton of tea leaves: 9. Vietnam Indonesia JPer ton of coffee oe i. a jbean |Per ton of tea leaves45 hours ‘50 hours Which of the follawing statements is correct? (1 mark) @ You scored 1/1 mark Indonesia produces more coffee beans than Vietnam does. Indonesia has an absolute advantage in producing coffee beans. Indonesia’s opportunity cost of a ton of coffee beans is 2.5 tons of tea leaves. Vietnam's opportunity cost of a ton of tea leaves is 15 tons of coffee beans. © Vietnam has a comparative advantage in producing coffee beans. (& General Comments Absolute advantage is based on the inputs required to produce a good. Comparative advantage is based on the opportunity cost of producing a good.410, Which of the folowing statements is notvalid when supply s perfectly elastic? ‘The elasticity of supply approaches infinity. “The supply curve is horizontal Very small changes in price lead to large changes in quantity supplied IV. The time period under consideration is more likely to bea short period than a long period. (1 mark) You scored 1/1 mark and Hand Noy. © von. land. & General comments ‘What are the properties of a perfectly elastic supply curve? 11, Amelfare loss ina market (1 mark) You scored 1/1 mark ismeasured asthe area below the market price and tothe lft of the market quantity © Isthe dolar value of potential benefits nat achieved duet inefficiency that market. istypically minimized when a government sets price celing ismeasured asthe area above the market price and tothe lft ofthe market quanti isthe dollar difference between consumer surplus and producer surplus, & General Comments Howis total surplus maximized?12. Harvey tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $175 per tuning, One particular week, Harvey is willing to tune the first piano for $120, the second piano for $130, the third piano for $150, and the fourth piano for $180 Assume Harvey is rational in deciding how many pianos to tune. His producer surplus is (1 mark) go You scored 1/1 mark $25. $55. © $125. $150. $100. (© General Comments How many pianos does Harvey tune? Sum up the producer surplus for each piano he tunes.13, Inthe figure below, the price elasticity of demand equals between points T and U, and equals between points V and w. BS (1 mark) You scored 11/1 mark © 1.86; 0.33 350.54 0.54;3 232 0.33; 1.86 & General comments As the price changes, how does the quantity demanded change? Use the midpoint method.14, Atechnological advance in the production of PlayStations wil ome @ You scored 1/1 mark decrease consumer surplus in the market for PlayStations and increase producer surplus in che market for PlayStation games. increase consumer surplus in the market for PlayStations and increase or decrease producer surplus in the market for PlayStation games, decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games, © increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. & General comments Draw a graph for PlayStations, and another graph for PlayStation games. What happens when there isa technological advance in the production of PlayStations? 415, Acollege student eats instant noodles twice a week and earns $300 @ week working part time. After graduating, he now earns $7,000 a ‘week and eats instant noodles once every other week, What is his income elasticity of demand for instant noodles? ome You scored 1/1 mark 082 oat 032 1162 090 & General comments \What isthe formula for income elasticity of demand? ‘Make sure al the numbers are for the same duration of time, I, ifthe original quantity is for a one-week period, the new quantity should also be for a one-week period.