Question

d) increase its advertising budget but keep the price

consider the market for avocados. a major hurricane destroys a large portion of the avocado crop. at the same time, a new celebrity diet makes avocados extremely popular. how will this affect the market for avocados?
a) the price will definitely increase, but the change in quantity is uncertain.
b) the price will definitely decrease, but the change in quantity is uncertain.
c) the quantity will definitely decrease, but the change in price is uncertain.
d) the quantity will definitely increase, but the change in price is uncertain.

when japan, a country that does not have a competitive advantage in producing rice, opens itself to international trade, what happens to its domestic rice market?
a) total economic surplus in japan decreases because local rice farmers lose business.
b) total economic surplus in japan increases because the benefit to japanese consumers is greater than the loss to japanese farmers.
c) the price of rice in japan increases, helping farmers but hurting consumers.
d) japan begins exporting rice, leading to an increase in total economic surplus.

the government provides a per - unit subsidy to the producers of corn. the benefit of this subsidy will go more to the producers (sellers) than the consumers if:
a) the demand for corn is more inelastic than the supply.
b) the supply of corn is more inelastic than the demand.
c) both supply and demand are perfectly elastic.
d) the subsidy is given in cash to the producers.

Explanation:

1. For the avocado - market question: A major hurricane destroying a large portion of the avocado crop reduces supply (left - shift of the supply curve). A new celebrity diet making avocados popular increases demand (right - shift of the demand curve). When supply decreases and demand increases, the price will definitely increase. However, the net change in quantity depends on the magnitudes of the shifts of the supply and demand curves, so it is uncertain.
2. For the Japan rice - market question: When a country without a competitive advantage in producing a good (rice in this case) opens to international trade, it will import the good. Consumers gain more than producers lose because they can buy at a lower world - price. So, the total economic surplus in Japan increases.
3. For the corn subsidy question: The side of the market (buyers or sellers) that is more inelastic bears a larger share of the tax or gets a larger share of the subsidy. If the supply of corn is more inelastic than the demand, producers (sellers) will get more of the benefit of the per - unit subsidy.

Answer:

1. a) The price will definitely increase, but the change in quantity is uncertain.
2. b) Total economic surplus in Japan increases because the benefit to Japanese consumers is greater than the loss to Japanese farmers.
3. b) The supply of corn is more inelastic than the demand.