Changes to the ______ lead to shifts in the demand curve.

The government heavily subsidizes the production of ethanol to encourage the purchase of ethanol over oil, a less environmentally friendly form of energy. Given that the supply elasticity of ethanol, ?, is estimated to be about 0

13, what would the elasticity of demand, ?, have to be for consumers to receive at least half of the subsidy, and therefore encourage ethanol consumption? A) ? must be less than . B) ? must be greater than . C) ? must be more inelastic than the elasticity of supply. D) Both A and C.

The difference between cost-of-service regulation and rate-of-return regulation is that

A) the former sets prices based on actual costs, and the latter focuses on setting prices such that the firm earns a normal rate of return. B) the latter sets prices first, and then the firm must keep costs in line if it wants to earn a profit, and the former sets price high enough to cover costs. C) the former uses marginal cost pricing and the latter uses average cost pricing. D) the former uses average cost pricing and the latter uses marginal cost pricing.