In France,two Qualities of Wines Are Produced - Table Wine

question 72

Multiple Choice

In France,two qualities of wines are produced - table wine sold in bulk (bring your own bottle) and a higher quality of wine.Suppose that the English import all their wine from France.Then,we would we expect to find,on average that

• A) the English drink more of the higher quality of wine,because transportation costs will lower the relative price of high-quality wine relative to table quality wine.
• B) the English will drink more table quality wine,because transportation costs will raise the relative price of table quality wine to high-quality wine.
• C) the French will drink more of the high quality wine because transportation costs reduce demand for wine in England.
• D) the French will drink more of the high quality wine because the wine is produced there.

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Definitions:

Quantity Demanded

The amount of a product or service consumers are willing and able to buy at a given price over a specified period of time.

Unit Elasticity

Demand or supply for which the elasticity coefficient is equal to 1; means that the percentage change in the quantity demanded or quantity supplied is equal to the percentage change in price.

Quantity Demanded

The total amount of goods or services that consumers are willing and able to purchase at a given price.

Price Elasticity

The degree to which demand for an item is affected by changes in its cost.