Discussion Forum1A Practice Problems2023-3

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Economics

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Feb 20, 2024

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Discussion Forum 1 st Section A Practice Problems 1. Suppose the following information is known about a market: a. Sellers will not sell at all below a price of $2. b. At a price of $10, any given seller will sell 10 units. c. There are 100 identical sellers in the market. Assuming a linear supply curve, use this information to derive the market supply curve. Answer: Q = -250 + 125p or P = 2 + .008Q. 2.Suppose the market supply curve is p = 5 + Q. At a price of 10, producer surplus equals A) 50. B) 25. C) 12.50. D) 10. 3) If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, calculate the arc (midpoint) own-price elasticity. A) -1.92 B) -1.64 C) -4 D) -2 4) If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals A) $0. B) $1. C) $2. D) $4.

5. Coeff. Std. Error T-stat P-value Lower 95% Intercept 131.92 17.76 7.43 0.00 97.11 166.73 Price of Good −7.46 1.18 −6.34 0.00 −9.86 −5.06 Price of Related Good 10.24 0.97 10.60 0.00 8.27 12.21 Income 0.30 0.10 3.00 0.01 0.10 0.50 The demand for your product demands on three factors; the price of your good, the price of a related good, and the average income of your customers. Excel estimated the above linear demand for your product. Use the coefficients column as the basis for your calculations. If the price of your good is $8, the price of the related good is $5, and the average income of consumers is $25,000, what is the point elasticity of demand? A.0.01 B.0.75 C.1.25 D.0.26 6. You are a consumer of goods for sale in our classroom "store". You have a total income of $5 to spend on goods. You may buy any number of the products that you desire ( as long as you spend only $5 ) and you don’t have to purchase all of the products, but you must spend all of your income. The prices of the products for sale are listed below. The "Market Quantities" column is computed from classroom responses. Snicker bars are the focus good. Market Quantities Can of Coke =$1 26 Snickers Bar =$1 37 Twinkie =$1 16 Carton of Milk =$1 26 Situation 2 - "Another New Day" The price of Snickers Bars remains at its original market price of $1). Further, a university donor has offered more scholarship support ($3) to students, leading to increased income for all. Once again, remember to spend all of your income ($8). The market column is based on new student responses.

Market Quantities Can of Coke =$1 37 Snickers Bar =$1 52 Twinkie =$1 39 Carton of Milk =$1 40 What is the income elasticity of demand of students for consuming Snickers? a. -0.10 b. -0.73 c. 0.73 d. 1.10 7. In a competitive market, the market demand is Q d = 60 - 6P and the market supply is Q s = 4P. The full economic price under a price ceiling of $3 is A. 6. B. 7. C. 8. D. 9. 8. Suppose market demand and supply are given by Q d = 100 - 2P and Q S = 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total cost to the government will be: A) $1,650. B) $1,375. C) $900. D) $1,125

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