Week 1 SCORM

The graph shows the market for books when books are not taxed. Qd=Qs=$5. Now the government imposes a tax on buyers of the book of $4 a book. The tax paid by the seller is ______ and the tax paid by the buyer is _____. a. $2, $2 b. $0, $4 c. $4, $0 d. $1, $3

a. $2, $2 Supply curve shifts to the left with a new Y intercept at $4 instead of $0. Buyer now sees price of $7 after tax; seller just gets $3 for selling each of the new 3 units after giving $4 to government.

Assume a supply equation: Qs = 0.1px-0.02ip+0.01N+0.01T-0.1w where: p=own price Q=quantity supplied (000s units) pi=price of an input=$100 N=number of firms=$600 T=index of technology=700 w=wage rate=$110 If the price of the good is $2424, what would the be the quantity supplied? a. 242 units b. 1242 units c. 100 units d. 124 units

a. 242 units Reduced form equation becomes Qs=0.1p At P=$2424, Qs=242

Demand for lift tickets at a popular ski resort is given by: Qx = 2500-0.25Px+2pt-4plodging+0.005Y p=price of a lift ticket Q=quantity demanded pt=price of a tropical vacation package=$900 plodging=price of ski resort lodging=$300 Y=consumer income=$60000 The inverse demand curve for lift tickets as a function of the quantity demanded (Q) can be written as: a. Px = 13,600 - 4Qx b. Px= 4,000 - 13.6Qx c. Qx = 3,100 - 0.25Px d. Qx = 2,500 - 2.5Px

a. Px = 13,600 - 4Qx The inverse demand curve for lift tickets as a function of the quantity of lift tickets demanded (Q) can be written as: P=13600-4Q substitute in values for pt, plodging, Y to get: Q=2500-0.25P+(2*900)-(4*300)+(0.005*60000) = 2500+1800-1200+900-0.25P = 3400-0.25P = Q

Saccharin and aspartame are both low-calorie substitutes for sugar. If the price of saccharin suddenly increases due to a factory fire, a. The price of aspartame will eventually increase b. The price of sugar will eventually decrease c. The quantity of saccharin will increase d. The market quantity of sugar sold will decrease

a. The price of aspartame will eventually increase Use the 3-step method from above: 1) Determine which curve shifts. Here demand curve, first for aspartame since it is a related good to saccharin. The higher the price of saccharin implies a movement down (less Qd for that good. 2) The higher price of saccharin implies a shift right of the demand curve for the substitute good aspartame. 3) The new aspartame market equilibrium will be a higher price and higher quantity demand. (This would also apply to the pure sugar market.)

The graph shows the demand for on-campus housing. The university has 10000 rooms. If a black market develops as a result of a rent ceiling set at $125 a week, what happens? a. the rents actually paid will range from a low of ​$125 a week to a high of ​$150 a week. b. the rents are $125 c. 12,500 units are rented d. 5,000 units are rented

a. the rents actually paid will range from a low of ​$125 a week to a high of ​$150 a week. Although some buyers will get rooms at the ceiling of $125, others must wait and have implicit costs up to the willingness-to-pay on the demand curve ($150)

You notice a market for a coffee drink in which there are 18 cups demanded per hour at a price of $2 yet only 1 store is selling 5 cups per hour. The natural tendency in the market is for: a. demand to increase. b. price to increase. c. quantity supplied to decrease. d. no change in the market.

b. price to increase. A higher price is needed to achieve a higher quantity supplied by producers. And at a higher price, consumers will demonstrate smaller quantity demanded.

Suppose the equilibrium price of a gallon of milk is​ $4. If the government imposes a price floor of​ $5 per gallon of​ milk, the a. demand decreases. b. quantity supplied of milk exceeds the quantity demanded. c. price of milk remains​ $4 per gallon. d. quantity supplied of milk falls short of the quantity demanded. e. supply increases.

b. quantity supplied of milk exceeds the quantity demanded. See analysis above. A price floor of $5 will help producers and increase the quantity supplied. But the higher price will hurt consumers, and they will reduce their quantity demanded.

The law of supply is depicted in which case: a. at P=$5, Qs=100; at P=$6, Qs=80. b. at P=$5, Qs = 100; at P=$6, Qs=100. c. at P=$5, Qs=100; at P=$60, Qs=140. d. at P=$5, Qs=100; at P=$60, Qs=0.

c. at P=$5, Qs=100; at P=$60, Qs=140. At higher prices, a firm is willing to supply more.

If A and B are complements, an increase in the price of good A would: a. have no effect on the quantity demanded of B. b. lead to an increase in demand for B. c. lead to a decrease in demand for B. d. none of the above.

c. lead to a decrease in demand for B. The increase in the price of good A leads to a smaller quantity demanded for good A. Since good B must be used with A, we must also need less of good B. The whole demand curve of good B shifts.

For a steel factory, a decrease in the cost of electricity to the plant will cause the supply curve to: a. become flatter. b. shift to the left. c. shift to the right. d. become parallel to the price axis.

c. shift to the right. Lower input prices means the producer can make more of the good at the same price of the good. This is an increase in supply.

If the supply function is Q = 0.5p x what is the market producer surplus if price is​ 20? a. $300 b. $200 c. $400 d. $100

d. $100 Note inverse supply function is 2Q=px so y-axis intercept is 0 0.5x20x10=100 Producer surplus is area above supply line below $20 price.

Two events occur simultaneously in the market for automobiles: (1) an improvement in assembly line technology and (2) the economy enters a recession. An economist would predict with certainty that: a. Equilibrium quantity will rise b. Equilibrium quantity will fall c. Equilibrium price will rise d. Equilibrium price will fall

d. Equilibrium price will fall 1) The technology change affects the supply curve. The income change affects the demand curve. 2) The supply curve increases (shifts right) and the demand curve decreases (shifts left). 3) This is the upper right cell in the box above: the change in the quantity is indeterminate, but the equilibrium price will fall direction of demand.

The law of demand states that, holding all else constant: a. as price falls, demand will fall also. b. as price rises, demand will also rise. c. price has no effect on quantity demanded. d. as price falls, quantity demanded rises.

d. as price falls, quantity demanded rises. This is a movement along a single demand curve. With higher prices, the consumer can afford fewer units, given the set income/budget. A shift in a demand curve is written as "a change in demand".