1.The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $26, $14, $10, $5, and $3 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $10, $14, $26, $34, and $42 (one buyer at each price).

For each price shown in the following table, use the given information to enter the quantity demanded and quantity supplied.

Price Quantity Demanded Quantity Supplied

($ per widget) (widgets) (widgets)

$3

$5

$10

$14

$26

$34

$42

In this market, the equilibrium price will be (?) per widget, and the equilibrium quantity will be(?) widgets.

2.Suppose that due to the outbreak of a new flu, known as H14N9, the demand for hand sanitizer has tripled.

Smith & Smith, a company that produces and sells hand sanitizer, should(Increase or decrease?)production of its hand sanitizer.

Suppose there is no vaccine for H14N9, and that a vaccine will not be developed for several decades.

True or False: Smith & Smith should increase its productive capacity by leasing new plant and equipment?

True

False

3.Indicate whether the following change would cause a shift in the demand curve for product A and, if so, the direction of the shift?

Change Demand Curve Shift Direction of Shift

A decrease in the price of a substitute product(No or yes?) (N/A, increase or decrease?)

4.Suppose that on Valentine's Day, the demand for both roses and greeting cards increases by the same percentage amount. However, the price of roses increases by more than the price of greeting cards.

Based on this information, you can conclude that the supply of roses is(less or more?)sensitive to price than the supply of Valentine's cards.

5.Distributors of beer earn some monopoly profits in their local markets but see them slowly erode as substitutes enter the market. Suppose Nebraska has scheduled a vote on the legalization of marijuana. Additionally, suppose that marijuana and beer are substitutes and that the legalization of marijuana would lead to a decrease in the price of marijuana.

Given the relationship between marijuana and beer, the legalization of marijuana would lead to(a decrease or an increase?)in demand for beer. Thus, distributors of beer would likely(Support or oppose?)the legalization of marijuana.

6.Relative to managers in more(Competitive or monopolist?)industries, managers in more(monopolistic or competitive?)industries are more likely to spend their time on pricing strategies rather than on reducing costs.

7.Describe the difference in economic profit between a competitive firm and a monopolist in both the short and long run. Which should take longer to reach the long-run equilibrium?

In the short run, both monopolists and competitive firms(can or cannot?)earn positive economic profits. In the long run,(both monopolist and competitive firms or competitive firms but not monopolist or neither monopolist nor competitive firms or monopolist, but not competitive firms?)can earn a positive economic profit.

True or False: The adjustment to long-run equilibrium takes the same amount of time for monopolies and competitive industries?

True

False