Question

21.The cross-price elasticity between Bob's Beans and Sue’s Cauliflower is 0.4. The cross-price elasticity between Sue's Cauliflower and John's Corn is 3.2. An economist would conclude that

Sue's Cauliflower and John's Corn are much stronger substitutes than are Bob's Beans and Sue's Cauliflower.

Sue's Cauliflower and John's Corn are much stronger complements than are Bob's Beans and Sue's Cauliflower.

Bob's Beans and Sue's Cauliflower are substitutes because their cross-price elasticity is less than one.

Bob's Beans and Sue's Cauliflower are complements because their cross-price elasticity is less than one.

22.Deadweight losses result when

the additional revenue firms receive from the higher prices reduce consumer surplus.

people who would not have bought the product before the tax are now even more likely to not purchase them.

some people who would have experienced gains by buying the product prior to the tax no longer buy the product because of the tax.

more firms will try to sell the product at the higher, after-tax prices.

some people continue to buy the product at a higher after-tax price.

Answer 1

(21) The cross-price elasticity between Bob's Beans and Sue’s Cauliflower is 0.4. The cross-price elasticity between Sue's Cauliflower and John's Corn is 3.2. An economist would conclude that Sue's Cauliflower and John's Corn are much stronger substitutes than are Bob's Beans and Sue's Cauliflower.

(22) Deadweight losses result when some people who would have experienced gains by buying the product prior to the tax no longer buy the product because of the tax.