Question

64) In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Suppose the effect on the buyers was larger than the effect on the sellers. Consequently, in the current market for peanut butter there is a   in the price of peanut butter and   in the quantity of peanut butter.
A) rise; a decrease
B) fall; an increase
C) rise; an increase
D) fall; a decrease
65) If the money price of wheat increases and no other prices change, the
A) relative price of wheat is unaffected.
B) demand for wheat increases.
C) relative price of wheat falls.
D) opportunity cost of wheat rises.

68) Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. In 2007, each kiosk averaged about 50 rentals per day. Suppose Redbox increases their daily price to $1.50. What is the price elasticity of demand if rentals decrease by 20 per day?
A) 0.8
B) 1
C) 1.25
D) 1.33
69) When the government chooses to spend the tax dollars that it collects on homeland security, its choice
A) primarily affects who gets the goods and services produced.
B) illustrates that scarcity does not always exist.
C) involves a tradeoff of other goods and services such as education for more homeland security.

Answer 1

64) C) rise; an increase
(Due to increase in expected future prices, demand will increase and supply will decrease but increase in demand > decrease in supply so price and quantity both increase.)

65) D) opportunity cost of wheat rises.
(As price of wheat rise, its opportunity cost will increase.)

68) C) 1.25
New demand, Q2 = 50 - 20 = 30
Elasticity of demand = [(Q2-Q1)/(P2-P1)]*[(P2+P1)/(Q2+Q1)] = [(30-50)/(1.5-1)]*[(1.5+1)/(30+50)] = (-20/.5)*(2.5/80) = -1.25

69) C) involves a tradeoff of other goods and services such as education for more homeland security.
(Amount spent on homeland decrease the amount spent on other goods so it involves a tradeoff.)