1)a) Graphically portray supply and demand for a virus drug. Indicate what happens when the virus drug is found to be ineffective.

b) On another graph, demonstrate what happens to price and quantity of the virus drug in the short term and long term if the drug cures the virus.

2)You are presently selling 500 cups of coffee per day at $1.200 per cup. You want to increase sales by dropping the price to $0.80 per cup. The Price Elasticity of Demand is -2.4.

a)What is your expected new level of sales?

b)Compare Total Revenue before and after the change in price.

c)How would you characterize this product?

3)A deli across the street drops the price of their coffee from $1.50 per cup to $1.25 per cup. The Cross Price Elasticity of Demand is 1.2. Using your answer from question 2 above as a starting point, determine your sales volume after the price reduction by the deli.

4)Given the Demand Function Q = 40,000 - 5P.

a)Determine the MR function.

b)At what level of output is TR maximized?

c)What is the relevance of this problem?

5)How is a demand function developed?

6)The marginal product of a domestic laborer is 5 units per hour. The domestic worker is paid $20 per hour. The management is considering automation. The machine can make 120 units per hour at an hourly cost of $400 per hour.

a.At what level of production can the domestic laborer be competitive with the machine?

b.The union is willing to accept a pay cut to retain jobs. At what salary level does the domestic worker achieve parity with the machine?

c.Non union workers have a marginal product of 3 units per hour. What is their parity wage rate as compared to 1) the machine or 2) the domestic worker?

7)A high volume buyer is given lower prices per unit. What type of price discrimination is this? Explain.