Refer to figure 4-9. in this market, equilibrium price and quantity, respectively, are

EC202 Fall 2016

Homework 1 (due Oct 12) Name_______________________

1. Which of these statements best represents the law of demand?

a. When buyers’ tastes for a good increase, they purchase more of the good.

b. When income levels increase, buyers purchase more of most goods.

c. When the price of a good decreases, buyers purchase more of the good.

d. When buyers’ demands for a good increase, the price of the good increases.

Table 4-9
An Increase in Supply

A Decrease in Supply

An Increase in Demand

A

B

A Decrease in Demand

C

D

2. Refer to Table 4-9. Which combination would produce an increase in equilibrium quantity and an indeterminate change in equilibrium price?

a. A

b. B

c. C

d. D

3. Refer to Table 4-9. Which combination would produce an increase in equilibrium price and an indeterminate change in equilibrium quantity?

a. A

b. B

c. C

d. D

4. Refer to Table 4-9. Which combination would produce a decrease in equilibrium price and an indeterminate change in equilibrium quantity?

a. A

b. B

c. C

d. D

5. Refer to Table 4-9. Which combination would produce a decrease in equilibrium quantity and an indeterminate change in equilibrium price?

a. A

b. B

c. C

d. D

Table 4-10
The following table shows the number of cases of water each seller is willing to sell at the prices listed.

Price per case

Alpine Springs

Brook Mountain

Cascade Waters

Dew Good

$0.00

0 cases

0 cases

0 cases

0 cases

$3.00

100 cases

40 cases

60 cases

100 cases

$6.00

200 cases

80 cases

120 cases

200 cases

$9.00

300 cases

120 cases

180 cases

300 cases

6. Refer to Table 4-10. If Alpine Springs and Dew Good are the only two suppliers in this market, by how much does the market quantity supplied change with each $3 increase in price?

a. -200 cases

b. -100 cases

c. 100 cases

d. 200 cases

7. Refer to Table 4-10. If the four suppliers listed are the only suppliers in this market and the market demand schedule is:

Price

Quantity Demanded

$0.00

1200

$3.00

900

$6.00

600

$9.00

300

the equilibrium price and quantity are

a. $0.00 and 1200 cases

b. $3.00 and 300 cases

c. $6.00 and 600 cases

d. $9.00 and 600 cases

8. Refer to Table 4-10. If the four suppliers listed are the only suppliers in this market and the market quantity demanded is 500 cases when the price is $5.00, which of the following statements is correct?

a. The market is in equilibrium at a price of $5.00.

b. There is a surplus of 100 cases at a price of $5.00.

c. There is a shortage of 100 cases at a price of $5.00.

d. There is a shortage of 50 cases at a price of $5.00.

Table 4-11
Price

Quantity Demanded

Quantity Supplied

$10

10

60

$8

20

45

$6

30

30

$4

40

15

$2

50

0

9. Refer to Table 4-11. The equilibrium price and quantity, respectively, are

a. $2 and 50 units.

b. $6 and 30 units.

c. $6 and 60 units.

d. $12 and 30 units.

10. Refer to Table 4-11. If the price were $8, a

a. shortage of 20 units would exist, and price would tend to rise.

b. surplus of 25 units would exist, and price would tend to fall.

c. shortage of 25 units would exist, and price would tend to rise.

d. surplus of 45 units would exist, and price would tend to fall.

11. Refer to Table 4-11. If the price were $4, a

a. surplus of 15 units would exist, and price would tend to fall.

b. shortage of 25 units would exist, and price would tend to rise.

c. surplus of 25 units would exist, and price would tend to fall.

d. shortage of 40 units would exist, and price would tend to rise.

Table 4-12
A country club usually only allows members to purchase tickets for its celebrity golf tournament, but the club is considering allowing non-members to purchase tickets this year. The demand and supply schedules are as follows:

Price

Quantity Demanded

by Members

Quantity Demanded

by Non-members

Quantity Supplied

$10

1000

500

600

$15

800

400

600

$20

600

300

600

$25

400

200

600

$30

200

100

600

12. Refer to Table 4-12. If only members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price?

a. $10

b. $15

c. $20

d. $25

13. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price?

a. $10

b. $15

c. $20

d. $25

14. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $30, then there will be

a. a shortage of 300 tickets.

b. a surplus of 300 tickets.

c. 600 tickets sold.

d. 600 tickets unsold.

15. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $20, then there will be

a. a shortage of 300 tickets.

b. a surplus of 300 tickets.

c. 300 tickets sold.

d. 600 tickets unsold.

16. Consumer surplus is

a. a concept that helps us make normative statements about the desirability of market outcomes.

b. represented on a graph by the area below the demand curve and above the price.

c. a good measure of economic welfare if buyers' preferences are the primary concern.

d. All of the above are correct.

17. In a market, the marginal buyer is the buyer

a. whose willingness to pay is higher than that of all other buyers and potential buyers.

b. whose willingness to pay is lower than that of all other buyers and potential buyers.

c. who is willing to buy exactly one unit of the good.

d. who would be the first to leave the market if the price were any higher.

Table 7-1
Buyer

Willingness To Pay

Calvin

$150.00

Sam

$135.00

Andrew

$120.00

Lori

$100.00

18. Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?

a. Calvin

b. Calvin and Sam

c. Calvin, Sam, and Andrew

d. Calvin, Sam, Andrew, and Lori

19. Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

a. Calvin

b. Calvin and Sam

c. Calvin, Sam, and Andrew

d. Calvin, Sam, Andrew, and Lori

20. Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is

a.

$28.

b.

$41.

c.

$43.

d.

$405.

21. Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is

a. $-50.

b. $-35.

c. $15.

d. $150.

22. Refer to Table 7-1. If the market price is $105,

a. Calvin’s consumer surplus is $45 and total consumer surplus is $85.

b. Sam’s consumer surplus is $30 and total consumer surplus is $90.

c. Andrew’s consumer surplus is $15 and total consumer surplus is $67.50.

d. Lori’s consumer surplus is ­$2 and total consumer surplus is $100.

Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.

Buyer

Willingness To Pay

David

$8.50

Laura

$7.00

Megan

$5.50

Mallory

$4.00

Audrey

$3.50

23. Refer to Table 7-2. If the price of Vanilla Coke is $6.90, who will purchase the good?

a. all five individuals

b. Megan, Mallory and Audrey

c. David, Laura and Megan

d. David and Laura

24. Refer to Table 7-2. Which of the following is not true?

a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.

b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one.

c. At a price of $4.00, total consumer surplus in the market will be $9.00.

d. All of the above are correct.

25. Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be

a. $3.00.

b. $4.50.

c. $15.50.

d. $21.00.

26. Refer to Table 7-2. If the market price is $3.80,

a. David’s consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50.

b. Megan’s consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.

c. David, Laura, and Megan will be the only buyers of Vanilla Coke.

d. the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.

Figure 7-6

27. Refer to Figure 7-6. At the equilibrium price, consumer surplus is

a. $1,600.

b. $800.

c. $1,400.

d. $700.

28. Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

a. $200.

b. $400.

c. $600.

d. $800.

Figure 7-11

29. Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

a. $625

b. $1,250

c. $2,500

d. $5,000

30. Refer to Figure 7-11. If the supply curve is S’, the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

a. $625

b. $1,250

c. $2,500

d. $5,000

31. Refer to Figure 7-11. If the demand curve is D and the supply curve shifts from S’ to S, what is the change in producer surplus?

a. Producer surplus increases by $625.

b. Producer surplus increases by $1,875.

c. Producer surplus decreases by $625.

d. Producer surplus decreases by $1,875.

32. Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D’, what is the change in producer surplus?

a. Producer surplus increases by $3,125.

b. Producer surplus increases by $5,625.

c. Producer surplus decreases by $3,125.

d. Producer surplus decreases by $5,625.

33. Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D’, what is the increase in producer surplus to existing producers?

a. $625

b. $2,500

c. $3,125

d. $5,625

34. Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D’, what is the increase in producer surplus due to new producers

a. $625

b. $2,500

c. $3,125

d. $5,625

35. Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

a. demand for ice cream cones in this price range is elastic.

b. demand for ice cream cones in this price range is inelastic.

c. demand for ice cream cones in this price range is unit elastic.

d. price elasticity of demand for ice cream cones in this price range is 0.

36. When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month.

Maxine's demand for chai tea lattés is

a. elastic, and her demand curve would be relatively flat.

b. elastic, and her demand curve would be relatively steep.

c. inelastic, and her demand curve would be relatively flat.

d. inelastic, and her demand curve would be relatively steep.

Table 5-1
Good

Price Elasticity of Demand

A

1.9

B

0.8

37. Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

a. A is a luxury and B is a necessity.

b. A is a good after an increase in income and B is that same good after a decrease in income.

c. A has fewer substitutes than B.

d. A is a good immediately after a price increase and B is that same good 3 years after the price increase.

38. Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

a. A is laundry detergent and B is Tide.

b. A is Diet Pepsi and B is soda.

c. A is food and B is a yacht.

d. A is toilet paper and B is candles.

39. Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

a. A is pens and B is pencils.

b. A is a Snickers bar and B is a Milky Way bar.

c. A is an airline ticket from Chicago to New York demanded by a vacationer and B is an airline ticket from Chicago to New York demanded by a business traveler.

d. A is a bottle of water demanded by a tourist in a desert and B is a bottle of water demanded by a tourist in a rain forest.

40. Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is

a. 0.

b. 1.

c. 6.

d. 36.