1. John was discussing the market for cocoa beans with his friend Kim. John said, "Ever since Venezuela announced that its cocoa harvest was its lowest ever in fifteen years, the price of cocoa beans has been rising and rising and people are buying more and more. I think the demand for cocoa beans must be upward sloping." Is John right? Briefly explain why or why not. (10 points) Price per bushel Quantity Demanded (bushels) Quantity Supplied (bushels) US$2 40,000 0 4 36,000 4,000 6 30,000 8,000 8 24,000 16,000 10 20,000 20,000 12 18,000 28,000 14 12,000 36,000 16 6,000 40,000 2. Refer to the above table. The table contains information about the wheat market. Use the table to answer the following questions. (25 points) a. What are the equilibrium price and quantity of wheat? b. Suppose the prevailing price is US$6 per bushel. Is there a shortage or a surplus in the market? c. What is the quantity of the shortage or surplus? d. How many bushels will be sold if the market price is US$6 per bushel? e. If the market price is US$6 per bushel, what must happen to restore equilibrium in the market? f. At what price will suppliers be able to sell 36,000 bushels of wheat? g. Suppose the market price is US$14 per bushel. Is there a shortage or a surplus in the market? h. What is the quantity of the shortage or surplus? i. How many bushels will be sold if the market price is US$14 per bushel? j. If the market price is US$14 per bushel, what must happen to restore equilibrium in the market? 3. According to the Australian Wool Innovation, severe drought conditions in Australia contributed to the lowest level of wool production in 50 years. This record low production has driven up prices sharply in Australian wool markets. Meanwhile, the price of raw cotton increased significantly for the first time in many years. (30 points) a. Illustrate this observation with one demand and supply graph for the market for Australian wool and another demand and supply graph for raw cotton. b. Make sure that your graphs clearly show (1) the initial equilibrium before the decrease in the supply of Australian wool and (2) the final equilibrium. c. Use arrows to indicate any shifts in the demand and supply curves for each market. d. Label your graphs fully and write an explanation of your work. 4. Suppose the price of gasoline in July 2018 averaged $1.35 a gallon and 15 million gallons a day were sold. In October 2018, the price averaged $2.15 a gallon and 14 million gallons were sold. If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand. Indicate whether demand was elastic or inelastic. (15 points) 5. Suppose that at a price of $55,100 units were sold while at a price of $33,153 units were sold. Without calculating the price elasticity value, can you determine whether it is elastic, unit elastic, or inelastic? Explain your answer. (20 points)