Question

1.

A.The costs of environmental protection can be measured by

The materials balance problem.

The opportunity cost of resources used to protect the environment.

The difference between social benefits and social costs.

The difference between marginal social benefits and marginal social costs.

B. Because farm products have a low elasticity of demand, a small change in farm output will have

No effect on price.

An indeterminate effect on price.

A smaller effect on price.

A larger effect on price.

C. The price elasticity of demand for food is

Perfectly inelastic.

Perfectly elastic.

Relatively inelastic.

Relatively elastic.

D. Prices of farm products are

Subject to short-term swings.

Very stable in the short run.

The result of government-enforced price ceilings in the farming industry.

Below the market equilibrium price because of price support programs.

E. If the price elasticity of demand for food is low, an increase in supply due to an improvement in technology will result in a ______ price and _______ in total revenue.

lower; an increase

higher; a decrease

lower; a decrease

higher; an increase

Answer 1

A. The costs of environmental protection can be measured as the opportunity cost of the resources used for environmental protection. The correct option is the second option.

B. Since farm output has low elasticity of demand, a small change in output will have a smaller change in price. ( elasticity = % change in output/ % change in price is less than 1) . The correct option is the third option.

C. Food has a more inelastic demand than other goods since its the most basic necessity. Therefore, it has relatively inelastic demand. The correct option is third.

D. The supply of farm product is elastic in the short run due to fluctuations in weather conditions and technological changes. This leads to short term swings in the market for farm products. The correct option is first.

E. If the elasticity of demand for food is very low, an increase in supply does not lead to a corresponding increase in demand while decreasing  prices. Therefore, even though the price may decrease, the quantity demand does not change much reducing revenue. So, an improvement in technology will lead to lower price and a decrease in total revenue. The correct option is third.