Suppose a frost destroys the tomato crop in California but farmers see an increase in their revenues. Which of the following best explains this?
A) Tomatoes are necessities.
B) The demand for tomatoes is price inelastic.
C) The decrease in supply led to huge price increases.
D) The cross-price elasticity between tomatoes and most other substitute vegetables is very low.
B
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Use the following graph of the demand for noodles to answer the question below.
Refer to the three demand curves for noodles. Which of the following would shift the demand for noodles from D1 to D2?
A. an increase in the number of buyers of noodles B. People hear that eating noodles can have negative health effects. C. a decrease in the price of noodles D. a decrease in the number of buyers of noodles
If two goods have a cross elasticity of demand of -2, then when the price of one good increases, the demand curve of the other good
A) shifts rightward. B) shifts leftward. C) remains unchanged and the supply curve also remains unchanged. D) might shift rightward, leftward, or remain unchanged. E) remains unchanged but the supply curve shifts leftward.
When the supply of Swiss cheese decreases while the demand for Swiss cheese increases, the equilibrium ________ of Swiss cheese will definitely ________, ceteris paribus.
A. price; increase B. price; decrease C. quantity; increase D. quantity; decrease
Expected utility theory predicts that individuals will fully insure in actuarily fair markets so long as their tastes are state-independent. How might adverse selection result in some individuals under-insuring?
What will be an ideal response?