Question 22: Suppose that a great growing year dramatically increases the yield

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Question 22: Suppose that a great growing year dramatically increases the yield for citrus growers in Florida. Ceteris paribus, if the demand for citrus is inelastic we could expect that overall C 1 citrus growers' incomes will increase 2) quantity demanded will decrease because citrus is less scarce 3) citrus growers' incomes will remain unchanged 4 citrus growers' incomes will decrease Question 23: For people who use it, insulin is a good with only a few substitutes. Therefore, the elasticity of demand for insulin is most likely to be which of the following numbers, ceteris paribus? C 1) 1.0 C 2) 0.05 C 4) -2.0 Question 24: Ceteris paribus, if the ranchers raise the price of their cattle and as a result their total revenues from cattle sales increase, we can conclude that demand for the cattle in that price range is upward sloping 2) relatively inelastic C 3) unit elastic C 4) relatively elastic Question 41: You have just finished a summer internship with XYZ Company and are starting your junior year at MSU. XYZ Company liked your work so much that they have offered you a job paying $40,000 per year after you graduate in two years. If the interest rate is 5% per year, how much would this starting salary be worth today (rounded to the nearest dollar)? 1) $40,000 * 1.05-1.05-$44100 2) $40,000/1.05 $38,095 3) ($40,000/1.05) * 1.05 = $40,000 $40,000 / (1.05 * 1.05) = $36,281 c c 4)

Explanation / Answer

Ans:

22) Option 4

citrus growers income will decrease.

Demand is inelastic when the change in demand is less than the change in price. In this case increase in yield will increase the supply and the price will decrease. But since the demand is inelastic, the increase in demand is less than the decrease in price. Resulting in decrease in the income of citrus growers.  

23) option 2

elasticity = - 0.05

Since insulin has few substitutes the change in demand is less than the change in price which means the demand is inelastic.In case of inelastic demand the elasticity is less than 1.

24) Option 2

relatively inelastic

Demand is inelastic when the change in demand is less than the change in price. in this case increase in price is increasing the revenue which means the change in demand is less than the change in price. Hence the demand is inelastic.

41) Option 4

$40,000 / (1.05 * 1.05) = $36,281

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