1. In the state of Virginia, the demand for vanity license plates is ______ (elastic/inelastic), so an...

Question:

1. In the state of Virginia, the demand for vanity license plates is ______ (elastic/inelastic), so an increase in price would ______ (increase/decrease) total revenue from vanity plates.
2. A policy that limits the supply of illegal drugs increases the number of burglaries and robberies because ______ is ______.
3. If demand is elastic, an increase in price (increases/decreases) total revenue; if demand is inelastic, an increase in price (increases/decreases) total revenue.
4. Suppose that at the current price the price elasticity of demand for a campus film series is 2.0. If the price is cut, total revenue will____(increase/decrease).
5. Revenue Effects of a Bumper Crop. Your job is to predict the total revenue generated by the nation s corn crop. Last year s crop was 100 million bushels, and the price was $5 per bushel. This year s weather was favorable throughout the country, and this year s crop will be 110 million bushels, or 10 percent larger than last year s. The price elasticity of demand for corn is 0.50.
a. Predict the effect of the bumper crop on the price of corn. Assume that the entire crop is sold this year, meaning that the price elasticity of supply is zero. Illustrate with a complete graph.
b. Predict the total revenue from this year s corn crop.
c. Did the favorable weather increase or decrease the total revenue from corn? Why?
6. Elasticity and Vanity Plates. Suppose the price elasticity of demand for vanity plates in your state is 0.60. The initial price is $20 and the initial quantity is 1,000 plates per week. Suppose the state increases the price by 10 percent.
a. Predict the new quantity per week and total revenue per week.
b. The increase in price_____ (increases, decreases) total revenue because ______ is ______.
7. The Price of Heroin and Property Crime. The price elasticity of demand for heroin is 0.27. Suppose that half of heroin users support their habits with property crime, so the loss from property crimes committed by heroin users equals half the total spending (total revenue) on the drug. Suppose the government reduces the supply of heroin, increasing the equilibrium price by 20 percent. Fill in the blanks in the following table.

8. Revenue from Mobile Phones. Consider the demand for mobile phones. Suppose the price elasticity of demand for the market as a whole is 0.80. a. If all mobile-phone companies simultaneously increased their prices, will total revenue in the industry increase or decrease?
b. If a single mobile-phone company increased its price, would you expect the company s total revenue to increase or decrease? Explain.
9. Price Hikes and Cable TV Revenue. Four years ago the cable company in your city increased its price by 20 percent, and its total revenue increased. Last year, a new company started providing TV service with satellite dishes. This year, the cable company increased its price by 20 percent, but its total revenue decreased. Provide an explanation for the different revenue consequences of the cable company s price hikes.
10. According to an economic consultant, For your firm, an increase in price is a win-win situation. Your total revenue will increase and your total cost will decrease. Therefore, you ll earn more profit (equal to Total Revenue Total Cost).
a. Concerning the revenue effect of a price hike, what is the consultant assuming about your firm and its customers?
b. Concerning the cost effect of a price hike, what is the consultant assuming about your firm and itscustomers?