1. Problems and Applications Q1 Ana buys an iPhone for $150 and gets a consumer surplus of $200. Her willingness to pay for an iPhone is . If she had bought the iPhone on sale for $100, her consumer surplus would have been $ If the price of the iPhone had been $450, her consumer surplus would have been . 2. Problems and Applications Q2 A hurricane in Florida destroys half of the orange crop. Illustrate the effect this has on the market for oranges. (? O Supply Demand Supply Price of Oranges Demand Quantity of Oranges Consumer surplus in the market for orangesA hurricane in Florida destroys half of the orange crop. Illustrate the effect this has on the market for oranges. (?) O Supply Demand Supply Price of Oranges Demand Quantity of Oranges Consumer surplus in the market for oranges decreases Illustrate the effect the price change of orang e market for orange juice. increasesIllustrate the effect the price change of oranges has on the market for orange juice. O Supply Demand Supply Price of Orange Juice Demand Quantity of Orange Juice decreases increases Consumer surplus in the market for orange juice4. Problems and Applications Q4 It is a hot day, and Rajiv is thirsty. Here is the value he places on a bottle of water: Value of first bottle: $7 Value of second bottle: $5 Value of third bottle: $3 Value of fourth bottle: $1 From this information, complete the following table by deriving Rajiv's demand schedule. Price Quantity Demanded More than $7 $5.01 to $7 $3.01 to $5 $1.01 to $3 HHHHH $1 or fewer Based on Rajiv's willingness to pay, plot Rajiv's demand curve as a step function on the following graph using blue points (circle symbol) beginning at a quantity of 0 bottles of water. (9 -o- Rajiv's Demand 7 __ I:| E s Price=$4 In B \"a s a: 3 E 4 " Quantity Purchased 3 " A Consumer Surplus Quantity of Water Suppose the price of a bottle of water is $4. Use the black line (plus symbol) to draw a price line at $4. Next use the grey point (star symbol) to indicate how many battles of water Rajiv will buy at that price. Finally, use the green point (triangle symbol) to shade the area that represents Rajiv's consumer surplus from his purchases. In this case, Rajiv receives 55 in consumer surplus from his water purchase. Suppose the price of a bottle of water is $4. Use the black line (plus symbol) to draw a price line at $4. Next use the grey point (star symbol) to indicate how many battles of water Rajiv will buy at that price. Finally, use the green point (triangle symbol) to shade t - - - - n - represents Rajiv's consumer surplus from his purchases. decreases In this case, Rajiv receives in consumer surplus from his w If the price falls to $2, Rajiv now buys C] bottles of water. This v his consumer surplus to . increases 5. Problems and Applications Q5 Clancy owns a water pump. Because pumping large amounts of water is harder than pumping small amounts, the cost of producing a bottle of water rises as he pumps more. Here is the cost he incurs to produce each bottle of water: Cost of rst bottle: $1 Cost of second bottle: $3 Cost of third bottle: $5 Cost of fourth bottle: $7 From this information, complete the following table by deriving Clancy's supply schedule. Price Quantity Supplied $1 or less $1 to $3 $3 to $5 $5 to $7 More than $7 Based on Clancy's willingness to sell, plot his supply curve as a step function on the following graph using the orange points (square symbol). Be sure to plot your first point at (0, 0). 10 -0 Clancy's Supply Co V Price = $4 Price of Water A Quantity Sold N Producer Surplus 0 2 3 4 5 Quantity of Water Suppose the price of a bottle of water is $4.Suppose the price of a bottle of water is $4. Use the black line (plus symbol) to draw a price line at $4. Next use the grey point (star symbol) to indicate how many bottles of water Clancy will produce and sell at that price. Finally, use the purple point (diamond symbol) to shade the area that represents Clancy's producer surplus. In this case, Clancy receives in producer surplus from his water sales. If the price rises to $6, Clancy now sells C] bottles of water. This v his producer surplus to . 6. Problems and Applications Q6 Suppose Dmitri is the only seller in the market for bottled water and Antonio is the only buyer. The following lists show the value Antonio places on a bottle of water and the cost Dmitri incurs to produce each bottle of water: Antonio's Value Dmitri's Costs Value of first bottle: $9 Cost of rst bottle: $1 Value of second bottle: $7 Cost of second bottle: $4 Value of third bottle: $4 Cost of third bottle: $7 Value of fourth bottle: $1 Cost of fourth bottle: $9 The following table shows their respective supply and demand schedules: Price Quantity Demanded Quantity Supplied $1 or less 4 0 $1 to $4 3 1 $4 to $7 2 2 $7 to $9 1 3 More than $9 0 4 Use Dmitri '5 supply schedule and Antonio '5 demand schedule to nd the quantity supplied and quantity demanded at prices of $2, $5, and $8. Enter these values in the following table. Price Quantity Demanded Quantity Supplied 2 on UUU A price of v brings supply and demand into equilibrium. At the equilibrium price, consumer surplus is , producer surplus is , and total surplus is . If Dmitri produced and Antonio consumed one less bottle of water, total surplus would V . If instead, Dmitri produced and Antonio consumed one additional bottle of water, total surplus would V . Use Dmitri's supply schedule and Antonio's demand schedule to nd the quantity supplied and quantity demanded at prices of $2, $5, and $8. Enter these values in the following table. Price Quantity Demanded Quantity Supplied 2 |:] I: 5 :1 C 8 :1 C A price of v brings supply and demand into equilibrium. , producer surplus is , and total surplus is . and Antonio consumed one less bottle of water, total surplus would V . At the eq price, consumer surplus is If Dmitri . If instead, Dmitri produced and Antonio consumed one additional bottle of water, total surplus would v . Use Dmitri '5 supply schedule and Antonio '5 demand schedule to nd the quantity supplied and quantity demanded at prices of $2, $5, and $8. Enter these values in the following table. Price Quantity Demanded Quantity Supplied 2 5 8 A price of v brings supply and demand into equilibrium. At the equilibrium price, consumer surplus is , producer surplus is , and total sur- If Dmitri produced and Antonio consumed one less bottle of water, total surplus would V . If instead, Dmitri produced and Antonio consumed one additional bottle of water, total surplus would v . 8. Problems and Applications Q8 There are four consumers willing to pay the following amounts for haircuts, and there are four haircutting businesses with the following costs: Consumers' Willingness to Pay Firms' Costs Sean: $35 Firm A: $25 Musashi: $50 Firm B: $40 Rina : $40 Firm C: $30 Yvette: $25 Firm D: $45 Each firm has the capacity to produce only one haircut. For efficiency, should be given. Which businesses should cut hair? Check all that apply. O Firm A O Firm B Firm C O Firm D8. Problems and Applications Q8 There are four consumers willing to pay the following amounts for haircuts, and there are four haircutting businesses with the following costs: Consumers' Willingness to Pay Firms' Costs Sean: $35 Firm A: $25 Musashi: $50 Firm B: $40 Rina: $40 Firm C: $30 Yvette: $25 Firm D: $45 Each firm has the capacity to produce only one haircut. For efficiency, 0 haircuts should be given. Which business 0 haircuts t hair? Check all that apply. 1 haircut O Firm 2 haircuts O Firm 3 haircuts O Firm 4 haircuts O FirmWhich consumers should have their hair cut? Check all that apply. O Musashi O Rina O Sean O Yvette The maximum possible total surplus is $9. Problems and Applications Q9 1. Equilibrium Effects 2. Welfare Effects STEP: 1 of 2 Suppose a tightening of copyright legislation on Internet usage has increased the cost of film streaming services. Show the effect of the increase in production costs on the market for film streaming services. (? O Supply Demand Supply Price of Film Streaming Services Demand Quantity of Film Streaming ServicesPrior to the availability of film streaming services, people had to go to the theaters to watch movies; today, many people choose to watch movies at home through film streaming. According to this statement, film streaming services and movie tickets are complements Show the effect of the price change in the market for film streaming service t for movie tickets. substitutesShow the effect of the price change in the market for film streaming services on the market for movie tickets. O Supply Demand Supply Price of Movie Tickets Demand Quantity of Movie Tickets Consider the relationship between film streaming services and Internet services.Show the effect of the price change in the market for film streaming services on the market for Internet services. O Supply Demand Supply Price of Internet Services Demand Quantity of Internet Services Grade Step 1 TOTAL SCORE: 0/9 (to complete this step and unlock the next step)10. Problems and Applications Q10 A friend of yours is considering two cell phone service providers. Provider A charges $100 per month for the service regardless of the number of phone calls made. Provider B does not have a xed service fee but instead charges $0.5 per minute for calls. Your friend's monthly demand for minutes of calling is given by the equation Q) = 160 SOP, where P is the price of a minute. With Provider A, the cost of an extra minute is . With Provider B, the cost of an extra minute is . Given your friend's demand for minutes and the cost of an extra minute with each provider, if your friend used Provider A, he would talk for|:] minutes, and if he used Provider B, he would talk for minutes. This means your friend would pay $ for service with Provider A and for service with Provider B. Use the following graph to draw your friend's demand curve for minutes. Then use the green triangle to help you answer the questions that follow. Note: You will not be graded on any changes you make to the graph. (?) 5.00 O 4.50 Demand 4.00 3.50 3.00 Triangle 2.50 Price of Minutes 2.00 1.50 1.00 .50 0 20 40 60 80 100 120 140 160 180 2 Quantity of Minutes Your friend would obtain $ in consumer surplus with Provider A and |$ in consumer surplus with Provider B.Given this information, which provider would you recommend that your friend choose? 0 Provider A 0 Provider B 11. Problems and Applications Q11 Consider how health insurance affects the quantity of health care services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only $20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the $80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undergo.) Consider the following demand curve in the market for medical care. Use the black point (plus symbol) to indicate the quantity of procedures demanded if each procedure has a price of $100. Then use the grey point (star symbol) to indicate the quantity of procedures demanded if each procedure has a price of $20. 200 - "I- 130 - . 160 __ QD atP=$100 E 140 - 3 '0 g 120 GB at P=$20 a. fig 100 .1.) d} 5 so ._ O 3 -: so D. 40 20 Demand 0 I I I I I I I I I 0 10 20 30 4O 50 60 70 80 90 1 00 Quantity of Medical Procedures If the cost of each procedure to society is truly $100, and if individuals have health insurance as just described, the number of procedures performed will be V than the number that would maximize total surplus. Economists often blame the health insurance system for excessive use of medical care. Given your analysis, the use of care might be viewed as excessive because consumers get procedures whose value is v than the cost of producing them. If the cost of each procedure to society is truly $100, and if individuals have health insurance as just described, the number of procedures performed will be V than the number that would maximize total surplus. Econo E blame the health insurance system for excessive use of medical care. greater Given ~ is, the use of care might be viewed as excessive because consumers get procedures whose value is v than the cost of producing them. If the cost of each procedure to society is truly $100, and if individuals have health insurance as just described, the number of procedures performed Economists often blame the health insurance system for excessive use of medical care. m will be V than the number that would maximize total surplus. Given your analysis, the use of care might be viewed as excessive because consumers get procedures whose value is V than the cost of producing them