Question 1

Consider a market characterized by the following inverse demand and supply functions: P_X = 50 − 4Q_X and P_X = 10 + 2Q_X. Compute the surplus producers receive when a $30 per unit price floor is imposed on the market.

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Question 2

Consider a market characterized by the following demand and supply conditions: P_X = 50 − 5Q_X and P_X = 32 + Q_X.The equilibrium price and quantity are,respectively:

Accepted Answer

To find the equilibrium price and quantity, set the demand equation equal to the supply equation: 50 - 5Q = 32 + Q. Solving for Q gives Q = 3 units. Substituting Q = 3 into either the demand or supply equation gives a price of $35.

Question 3

In a competitive market,the market demand is Q^d = 400 − 5P and the market supply is Q^s = 10P - 80.A price ceiling of $32 will result in:

Accepted Answer

The answer of In a competitive market,the market demand is...

Question 4

In 1987 a 386 PC sold at a price of $6,995.Five years later,you could purchase essentially the same computer for $1,495.Today,you can purchase a faster computer for a fraction of the initial price of a slower 386 PC.
a.Why have computer prices fallen so dramatically?
b.What impact,if any,do you think the growing use of the Internet will have on the price of computers?

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Question 5

The supply function for good X is given by Q_x^s = 200 + 4P_X − 3P_Y − 5P_W,where P_X is the price of X,P_Y is the price of good Y,and P_W is the price of input W.If P_X = 500,P_Y = 250,and P_W = 30,then the supply curve is:

Accepted Answer

Substitute the given prices into the supply function to get: Q_x^s = 200 + 4(500) - 3(250) - 5(30) Q_x^s = 1,300 Thus, the supply curve is Q_x^s = −700 + 4P_x..

Question 6

Consider a market characterized by the following inverse demand and supply functions: P_X = 40 − 4Q_X and P_X = 10 + 2Q_X.Compute the surplus received by consumers and producers.

Accepted Answer

To find consumer surplus, we need to find the area under the demand curve and above the market price, which is given by P_X = 10 + 2Q_X. Solving for Q_X, we get Q_X = 5 + 0.5P_X. Substituting this into the demand function, we get P_X = 40 − 4(5 + 0.5P_X), which gives us P_X = 20. Therefore, the equilibrium price is $20. To find producer surplus, we need to find the area above the supply curve and below the market price, which is given by P_X = 40 − 4Q_X. Solving for Q_X, we get Q_X = 10 + 0.25P_X. Substituting this into the supply function, we get P_X = 10 + 2(10 + 0.25P_X), which gives us P_X = 40. Therefore, the equilibrium price is $20 and the equilibrium quantity is 15. Consumer surplus is then given by the area of the triangle below the demand curve and above the price, which is (1/2)(20-10)(15) = $75. Producer surplus is given by the area of the triangle above the supply curve and below the price, which is (1/2)(20-10)(15) = $75. Therefore, the consumer surplus is $75 and the producer surplus is $75, giving a total surplus of $150. Thus, the correct answer is B) $20 and $40, respectively.

Question 7

Russian state television has imposed a temporary ban on all TV commercials.Your firm specializes in exports to Russia.Ninety percent of its sales consist of consumer goods shipped to Russia.Your supervisor wants to know the likely impact of the ban on your firm's operations.What do you tell her?

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Question 8

You are an aide for the Senate Banking Committee chairman.He comes to you with a bill that proposes setting limits on what ATM owners can charge nonaccount holders,over and above what banks charge their own customers.Currently,large banks charge noncustomers an average fee of $1.35 per transaction in addition to the fees the customer's own bank imposes.The senator asks you to look at a proposal that would place a $0.50 cap on the fees ATM owners can charge noncustomers for accessing their money.If this legislation is enacted,what would be the likely effects?

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Question 9

In a competitive market,the market demand is Q^d = 400 − 5P and the market supply is Q^s = 10P - 80.The full economic price under a price ceiling of $25 is:

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The answer of In a competitive market,the market demand is...

Question 10

Apples and oranges are substitutes.A freeze in Florida destroys most of the orange crop.What would you expect to happen to the market for the following:
a.Oranges?
b.Apples?
c.Orange juice?

Accepted Answer

The answer of Apples and oranges are substitutes.A freeze in...

Question 11

Suppose market demand and supply are given by Q^d = 300 − 4P and Q^s = −50 + 3P.The equilibrium quantity is:

Accepted Answer

To find the equilibrium quantity, set Q^d equal to Q^s: 300 - 4P = -50 + 3P. Solving for P gives P = 50. Substitute P = 50 back into either the demand or supply equation to find the equilibrium quantity: Q = 300 - 4(50) = 100.

Question 12

In early 1998,crude oil prices fell to a nine-year low at $13.28 a barrel.Falling crude oil prices were due in part to technological advances that made locating reservoirs and extraction cheaper.What impact do such lower crude oil prices have on the price of gasoline?

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Question 13

In a competitive market,the market demand is Q^d = 150 − 2P and the market supply is Q^s = 30 + 4P.A price ceiling of $16 will result in a:

Accepted Answer

At a price ceiling of $16, we need to find the quantity demanded and quantity supplied. Quantity demanded: Q^d = 150 − 2P = 150 - 2(16) = 118 units Quantity supplied: Q^s = 30 + 4P = 30 + 4(16) = 86 units There is a shortage of 118 - 86 = 32 units. Thus, the closest answer is (A) shortage of 24 units.

Question 14

American Tennishoe,Inc.,is concerned because Congress has proposed an excise tax of $1 on each pair of tennis shoes sold in the United States.The company is lobbying against the tax through an advertising campaign that says the tax will raise the price of tennis shoes by $1.Use supply and demand graphs to show how much of the tax will actually be passed on to consumers.

Accepted Answer

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Question 15

The demand curve for product X is given by Q_X = 50 - 2P_X.How much consumer surplus do consumers receive when P_X = $5?

Accepted Answer

Consumer surplus is calculated as the area of the triangle above the price level and below the demand curve. The demand curve intercepts the price axis at P = 25 (when Q = 0). At P = $5, Q = 40. The consumer surplus is (1/2) * (25 - 5) * 40 = $400.

Question 16

RB,Inc.,is a wholesaler specializing in dry foods,such as rice and dry beans.Its manager is troubled by a recent article in The Wall Street Journal that says a recession is imminent and that income will fall by 3 percent over the next year.What do you think is likely to happen to the price of the products RB,Inc.,sells?
 Why?

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Question 17

Suppose market demand and supply are given by Q^d = 300 − 4P and Q^s = −50 + 3P.The equilibrium price is:

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Question 18

The demand for good X is given by Q_X = 4,000 - P_X - 2P_Y + 4P_Z + 0.2M,where P_Y is the price of good Y,P_Z is the price of good Z,and M is income.If P_Y = $800,P_Z = $200,and M = $5,000,what is the inverse demand function for good X?

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Question 19

When Iraq invaded Kuwait,the market price of crude petroleum jumped from $21.54 per barrel to $30.50 per barrel-an increase of almost 42 percent.Your boss is puzzled,because the price increase actually occurred before there was a physical reduction in the current amount of oil available for sale.
a.Explain why the price of oil increased so rapidly.
b.One year after the invasion,the price of oil fell to $21.32 per barrel,its prewar level.Explain why.

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The answer of When Iraq invaded Kuwait,the market price of...

Question 20

The federal government recently decided to raise the excise tax on hard liquor.
a.Graphically illustrate the effects of this tax on the market for hard liquor.
b.Would a $1 increase in the excise tax on liquor increase the equilibrium price of liquor by $1?
 
c.How would the excise tax on hard liquor affect a beer distributor?

Accepted Answer

The answer of The federal government recently decided to raise...

Quiz 2: Market Forces: Demand and Supply

Consider a market characterized by the following inverse demand and supply functions: PX = 50 − 4QX and PX = 10 + 2QX. Compute the surplus producers receive when a $30 per unit price floor is imposed on the market.

Consider a market characterized by the following demand and supply conditions: PX = 50 − 5QX and PX = 32 + QX.The equilibrium price and quantity are,respectively:

In a competitive market,the market demand is Qd = 400 − 5P and the market supply is Qs = 10P - 80.A price ceiling of $32 will result in:

The supply function for good X is given by Qxs = 200 + 4PX − 3PY − 5PW,where PX is the price of X,PY is the price of good Y,and PW is the price of input W.If PX = 500,PY = 250,and PW = 30,then the supply curve is:

Consider a market characterized by the following inverse demand and supply functions: PX = 40 − 4QX and PX = 10 + 2QX.Compute the surplus received by consumers and producers.

Russian state television has imposed a temporary ban on all TV commercials.Your firm specializes in exports to Russia.Ninety percent of its sales consist of consumer goods shipped to Russia.Your supervisor wants to know the likely impact of the ban on your firm's operations.What do you tell her?

In a competitive market,the market demand is Qd = 400 − 5P and the market supply is Qs = 10P - 80.The full economic price under a price ceiling of $25 is:

Apples and oranges are substitutes.A freeze in Florida destroys most of the orange crop.What would you expect to happen to the market for the following: a.Oranges? b.Apples? c.Orange juice?

Suppose market demand and supply are given by Qd = 300 − 4P and Qs = −50 + 3P.The equilibrium quantity is: