Basic supply and demand analysis shows clearly that drug interdiction designed to cut the supply of illegal drugs is our best hope to win the war on drugs. 10. A major reason why OPEC has been unable to maintain high energy prices over a long period of time is that buyers can find more substitutes in response to high oil prices in the long run. 11 . An inferior good is a good characterized by a very low demand. 12 . The price elasticity of supply is likely to be greater for motor vehicles in general than it is for a specialized market, such as sport utility vehicles. 13 . The most likely effect of a global drought would be to lower farm incomes. 14. If the price elasticity of demand is unitary, then a change in price will leave total revenue unaffected. 15. If price elasticity of demand is zero, then any price change will also have a zero effect on total revenue. B. Multiple-Choice Questions 1. All else equal, the price elasticity of demand tends to be higher: a. the more substitutes there are for the good or service. b. the shorter the time period involved. c. the more consumers perceive the good to be a necessity. d. the more broadly defined the market is. e. the less important the product is in consumers' budgets. 2. A seller desiring to increase total revenue should: a. raise price only if demand is elastic. b. raise price only if demand is inelastic. c. lower price if demand is inelastic. d. lower price if demand has unitary elasticity. e. make pricing decisions based on elasticity of supply, not demand. 3. Senator Jones wants to reduce cigarette smoking by increasing tobacco taxes. It will probably take a fairly large tobacco tax to make much of a difference, because; a. price is irrelevant for consumers. b. demand for cigarettes is totally inelastic. c. demand for cigarettes is relatively inelastic. d. supply of tobacco is relatively inelastic. e. supply of tobacco is relatively elastic