Mad cow multiple choice

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1. in the late 1990's mad cow disease caused people to buy less beef. It also caused the eu to ban imported bristish beef and the bristish government to ban the sale of older cattle. What is the effect of the following on price and quantity of British beef sold worldwide?

d. Price of british beef falls initially, but regains some of its losses. Quantity sold falls

A decline in quantity demanded causes prices to fall. A decline in quantity supplied occurred becuse of the ban on older beef. Price increases as the supply curve shifts back. Quantity falls for each of these movements.

2. A quantity restriction of QR will:

b. reduce quantity supplied to QR

Excess demand does not occur because the price increases to PO. However, excess supply would be generated by the higher prices if the market were allowed to return to equilibrium.

3. Refer to graphs. The consequences of improved technology combined with an increased in the
number of consumers

a. graph A

Improved technology shifts the supply curve out while increased number of consumers shifts the demand curve out.

4. USA today noted that the destruction caused by three 2004 hurricanes combined with the already high real estate prices were making people reconsider retiring to Florida. The cost of homeownership was increasing partly because past hurricanes had roughly doubled insurance premiums statewide. Construction costs could rise due to stricter building codes. Some people however did not expect the influx of retirees to change because the baby boom generation was approaching retirement age and Florida had long attracted many retirees. Which factor would not move either the supply or demand curve.

c. the already high real estate price
Only new factors, such as an increase in the number of people moving or an increase in costs, would move the curves.

5. Which of the following is not held constant as you move along the demand curve

a. the price of that good

6. At a price of 90 cents per dozen

c. quantity demanded is just equal to quantity supplied

7. Demand and supply are initially D and S1. Which of the following best describes the effect of a $.50 per pound tariff on Danish hens imported into the US.

d. supply sifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 pound

8. Suppose that the following table shows the supply and demand schedules for Arabian light crude oil on the free market:

Price/Dollars barrel Quantity Demanded Quantity Supplied

26 14 10
27 13 11
28 12 12
29 11 13
30 10 14

Given the information in the table, the only price at which there is neither shortage nor surplus is:
$28 dollars per barrel

9. In 2004 Taiwan news online reports that demand for healthy kidneys is high in both India and Nepal. But it is also illegal to buy or sell organs. Despite the legal and social disapproval, there is an illegal market for organs. Assuming the legal and social disapproval does not influence sellers but discourages buyers from seeking organs, the disapproval will:

b. raise price but lower quantity
An inward shift of the demand curve raises prices and lowers quantity.

10. The graph depicts a third party payer market for prescription drugs. If the co payment is $2 per pill, what will be the total market expenditures on prescription drugs?

$2 x 15 = $30

The quantity on the market is given by the supply curve. At $2, suppliers are only willing to sell 15.

11. Compute the approximate elasticity of demand from the following data:
Initial Situation: Price: $23 Quantity: 11.5
New Situation: Price: $20 Quantity: 13.5

% change in price: 3/ 23 = .13
% change in quantity: 2/11.5 =.17

.17/.13=1.3

12. For substitutes:

a. cross price elasticity of demand can be any positive value

If a good substitutes for another, we would expect a ...