Deck 7: Equilibrium and Efficiency

Question 1

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as at prices below $5 and zero for prices above $5. If the market price for milk is $4.50, market demand is

A) Zero
B) 1.5
C) 1
D) 10

Answer 1

1

Question 2

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as at prices below $5 and zero for prices above $5. Market demand when price is $4 is

A) 12-3P
B) 10-2P
C) 22-3P
D) 22-5P

Answer 2

22-5P

Question 3

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as at prices below $5 and zero for prices above $5.

A) The market demand curve is upward sloping
B) The market demand curve is a downward sloping straight line
C) The market demand curve is kinked at a quantity of 2 units
D) The market demand curve is kinked at a quantity of 1 unit

Answer 3

The market demand curve is kinked at a quantity of 2 units

Question 4

Suppose Julia and Zach are the only consumers of milk. Julia's demand for milk is defined as at prices below $4 and zero for prices above $4. Zach's demand for milk is defined as at prices below $5 and zero for prices above $5.

A) The market demand curve is upward sloping
B) The market demand curve is a downward sloping straight line
C) The market demand curve is kinked at $5
D) The market demand curve is kinked at $4

Question 5

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $0.45

A) Milky Moo is the only supplier of milk
B) Mega Cow is the only supplier of milk
C) Both Milky Moo and Mega Cow supply milk
D) Neither Milky Moo nor Mega Cow supply milk

Question 6

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $0.45

A) The market supply of milk is between 9 and 10 units
B) The market supply of milk is between 4 and 5 units
C) The market supply of milk is between 5 and 6 units
D) The market supply of milk is between 1 and 2 units

Question 7

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $2.00

A) The market supply of milk is 33 units
B) The market supply of milk is 15 units
C) The market supply of milk is 18 units
D) The market supply of milk is 42 units

Question 8

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $2.00

A) The market supply of milk is 12P - 6
B) The market supply of milk is 9P - 3
C) The market supply of milk is 21P - 9
D) The market supply of milk is 12P - 9

Question 9

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $0.33

A) The market supply curve is kinked at $0.33
B) The market supply curve is kinked at $0.50
C) The market supply curve is downward sloping
D) The market supply curve is an upward sloping straight line

Question 10

Milky Moo and Mega Cow are the only sellers of milk. Milky Moo's supply function is at prices above $0.50 and zero at prices below $0.50. Mega Cow's supply function is at prices above $0.33 and zero at prices below $0.33. At a price of $0.33

A) The market supply curve is kinked at $0.33
B) The market supply curve is kinked at 1.5 units
C) The market supply curve is downward sloping
D) The market supply curve is kinked at 3 units

Question 11

Suppose that, in the long run, a dairy's variable costs areVC=2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC=4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the dairy's total cost function?

A)
B)
C)
D)

Question 12

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is the short run market supply function in terms of price?

A) 40P if price is greater than $20
B) P/4 if price is greater than $20
C) 2.5P if price is greater than $20
D) 300-10P

Question 13

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is the short run equilibrium price?

A) $20
B) $24
C) $10
D) $40

Question 14

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is the short run equilibrium quantity?

A) 100
B) 200
C) 50
D) 60

Question 15

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, how much does each of the active firms produce in the short run equilibrium?

A) 5
B) 6
C) 10
D) 20

Question 16

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms' profit per unit in the short run equilibrium?

A) $4
B) $20
C) $24
D) $10

Question 17

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. What is the new long-run equilibrium price?

A) $20
B) $40
C) $24
D) $2

Question 18

Suppose the market demand for milk is Q^d =150-5P. Additionally, suppose that a dairy's variable costs are VC = 2Q² (where Q is the number of gallons of milk produced each day), its marginal cost is MC =4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. How many total active firms are in the market in the long run due to the increased demand?

A) 10
B) 20
C) 100
D) 2

Question 19

The market demand function for ice cream is Q^d = 10- 2P and the market supply function for ice cream is Q^s = 4P-2 , where both quantities are measured in millions of gallons per year. What is the aggregate surplus at the competitive market equilibrium?

A) $4.2
B) $16.8
C) $8.4
D) $9

Question 20

The market demand function for ice cream is Q^d = 10- 2P and the market supply function for ice cream is Q^s = 4P-2 , where both quantities are measured in millions of gallons per year. What is the consumer surplus at the competitive market equilibrium?

A) $4.2
B) $6
C) $4.5
D) $3

Question 21

The market demand function for ice cream is Q^d = 10- 2P and the market supply function for ice cream is Q^s = 4P-2 , where both quantities are measured in millions of gallons per year. What is the producer surplus at the competitive market equilibrium?

A) $4.2
B) $5.4
C) $6
D) $3