19. Table 1 below shows the demand schedule for admissions to an amusement park: (The data are based on the equation P = 24 – 20). Table 1 Price Per Visit Per Person Number of Visits (thousands) $20 $ 164 $12 $8 $4 10 Refer to Table 1. The price elasticity of demand for amusement park admissions is a) greater at higher prices than at lower prices * b) greater at lower prices than at higher prices c) elastic at all points on the demand schedule d) constant at all points on the demand schedule e) inelastic at all points on the demand schedule.
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1.Individual farmers cannot individually affect market price because
a)There is an infinite demand for their goods.
b) Demand is perfectly inelastic for the farmer's produce.
c)Their individual production is insignificant relative to the production of the market.
d)The government exercises control over the market power of competitive firms.
2.Compared to the early 1950s, today farm output per labor-hour is
| a)10 times greater than it was then. |
| b) | The same as it was then. |
| c) | 20 times greater than it was then. |
| d) | 20 percent less than it was then. |
3.Because farm products have a low price elasticity of demand, a small change in farm output will have
| a) | An indeterminate effect on price. |
| b) | No effect on price. |
| c) | A smaller effect on price. |
| d) | A larger effect on price. |
4.The price elasticity of demand for food is
| a) | Perfectly inelastic. |
| b) | Relatively inelastic. |
| c) | Relatively elastic. |
| d) | Perfectly elastic. |
5.In order to continue earning an economic profit, individual farmers must
| a) | Expand their rate of output until marginal cost equals zero. |
| b) | Charge higher prices than their competitors. |
| c) | Continue to improve their productivity. |
| d) | Charge lower prices than their competitors. |
6.If a price support is maintained above the equilibrium price, the result will be a
| a) | Market price that is too low. |
| b) | Market price equal to the equilibrium price. |
| c) | Surplus of the product. |
| d) | Shortage of the product. |
7.The primary focus of U.S. farm policy has been
| a) | Subsidies. |
| b) | Price supports. |
| c) | Low-interest loans. |
| d) | Tax credits for mechanical equipment. |
1) Suppose your grandmother gave you $25 for your birthday and you decided to spend all of it on candy bars and bags of popcorn. The price of candy bars is $1.25 and price of a bag of peanuts is $3.75.
a) Construct a table showing the alternative combinations of the two products that are available.
b) Plot the data in your table as a budget line in a graph. What is the slope of the budget line? What is the opportunity cost of one more candy bar? Of one bag of peanuts?
c) How, in general, would you decide which of the available combinations of candy bars and bags of peanuts to buy?
2) With current technology, suppose a firm is producing 750 screwdrivers daily. Also assume that the least-cost combination of resources in producing those screwdrivers is 15 units of labor, 20 units of land, 4 units of capital, and 3 unit of entrepreneurial ability, selling at prices of $50, $45, $75, and $50, respectively. If the firm can sell these 750 screwdrivers at $2.50 per unit,
a) what is its total revenue?
b) what is its total cost?
c) what is its profit or loss?
d) will it continue to produce screwdrivers?
e) If this firmâs situation is typical for the other makers of screwdrivers, will resources flow toward or away from this product?
3) How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is, do equilibirium price and quantity rise, fall , or are the answers indeterminate because they depend on the magnitudes of the shifts?
a)Supply decreases and demand is constant. Change in eqilibrium price chnage in eqilibrium quantity
b)Demand decreases and supply is constant.
c)Supply increases and demand is constant.
d)Demand increases and supply increases.
e)Demand decreases and supply decreases.
4)Zeke likes to go to music concerts. The number of times per year that he attends concerts depends on both the price of the concerts as well as Zekeâs income and the cost of other types of entertainmentâin particular, how much it costs to go see a movie instead of attending concerts. The three demand schedules in the $60,000 per year and movies cost $10 each. In scenario D2, Zeke's income is also $60,000 per year, but the price of seeing a movie rises to $12. And in scenario D3, Zeke's income goes up to $80,000 per year, while movies cost $12.
a)Using the data under D1 and D2, calculate the cross-elasticity of Zeke's demand for concerts at all three prices. (To do this, apply the midpoints approach to the cross-elasticity of demand.) Is the cross-elasticity the same at all three prices? Are movies and concerts substitute goods, complementary goods, or independent goods?
b)Using the data under D2 and D3, calculate the income elasticity of Zeke's demand for concerts at all three prices. (To do this, apply the midpoints approach to the income elasticity of demand.) Is the income elasticity the same at all three prices? Are concerts an inferior good?
| PRICE | D1 | D2 | D3 |
| 50 | 10 | 5 | 12 |
| 40 | 15 | 10 | 25 |
| 30 | 25 | 15 | 40 |
Income 60,000 60,000 80,000
Cost of revenue 10 12 12
5) On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine (a) the market (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good.
| P | Qd(D1) | Qd(D2) | Qd(d3) |
| 20 | 0 | 0 | 1 |
| 19 | 0 | 1 | 2 |
| 17 | 0 | 2 | 3 |
| 16 | 0 | 3 | 4 |
| 15 | 1 | 4 | 5 |
| 14 | 2 | 5 | 6 |
| 13 | 3 | 6 | 7 |
| 12 | 4 | 7 | 8 |
| 11 | 5 | 8 | 9 |
| 10 | 6 | 9 | 10 |
