Demand_and_Supply_(Coke_and_Pepsi)

The following 15 questions refer to the following scenario:

The quantity demanded function for Coca-Cola (Coke), which is a normal good, is

Q_D=3 _(a.)_ 0.5P_Coke_(b.)_ 4P_Pepsi_(c.)_ 10P_Straws_(d.)_ 0.01Y

where

Q_D= Quantity demanded for Coca-Cola

P_Coke= Price of Coca-Cola

P_Pepsi= Price of Pepsi (a substitute)

P_Straws= Price of straws (a complement)

Y = Income

The quantity supplied function of Coca-Cola is

Q_S=3 _(e.)_ 1P_Coke_(f.)_ 3P_Water_(g.)_ 0.5T

where

Q_S= Quantity supplied of Coca-Cola

P_Coke= Price of Coca-Cola

P_Water= Price of water (an input factor)

T= Taxes on the supply of Coca-Cola

The letters is brackets refer to questions one to seven and are placeholders for mathematical signs.

Question 1(1 point)

Saved

What is the correct sign of (a.)?

Question 1 options:

+

-

x

Question 2(1 point)

Saved

What is the correct sign of (b.)?

Question 2 options:

+

-

Question 3(1 point)

Saved

What is the correct sign of (c.)?

Question 3 options:

+

-

Question 4(1 point)

Saved

What is the correct sign of (d.)?

Question 4 options:

+

-

Question 5(1 point)

Saved

What is the correct sign of (e.)?

Question 5 options:

+

-

Question 6(1 point)

Saved

What is the correct sign of (f.)?

Question 6 options:

+

-

Question 7(1 point)

Saved

What is the correct sign of (g.)?

Question 7 options:

+

-

To answer the next questions, assume the following parameters:

P_Pepsi= 1

P_Straws= 0.3

Y = 100

P_Water= 1

T= 2

Question 8(1 point)

Saved

What is the quantity demanded function?

Question 8 options:

Q_D=5-0.5P_Coke

P_Coke= 10-2Q_D

Q_D=10-1P_Coke

P_Coke= 5-2Q_D

Question 9(1 point)

Saved

What is the inverse quantity demanded function?

Question 9 options:

Q_D=5-0.5P_Coke

P_Coke= 10-2Q_D

Q_D=10-1P_Coke

P_Coke= 5-2Q_D

Question 10(1 point)

Saved

What is the quantity supplied function?

Question 10 options:

Q_S=1-0.5P_Coke

P_Coke= 1+Q_S

Q_S=-1+ P_Coke

P_Coke= 5-2Q_D

Question 11(1 point)

Saved

What is the inverse quantity supplied function?

Question 11 options:

Q_S=1-0.5P_Coke

P_Coke= 1+Q_S

Q_S=-1+ P_Coke

P_Coke= 5-2Q_D

Please draw the inverse demand and supply function into the graph below to answer the next questions.

Question 12(1 point)

At P_Coke=6, there will be _____ of _____ .

Question 12 options:

excess supply, 2

excess supply, 3

excess demand, 2

excess demand, 3

Question 13(1 point)

At P_Coke=2, there will be _____ of _____ .

Question 13 options:

excess supply, 2

excess supply, 3

excess demand, 2

excess demand, 3

Question 14(1 point)

The equilibrium quantity is

Question 14 options:

1

2

3

4

Question 15(1 point)

The equilibrium price is

Question 15 options:

1

2

3

4

Demand_and_Supply_(Welfare_Analysis)

The next 12 questions refer to the following scenario:

The (inverse) demand and supply functions are:

Demand: P=8-Q_D

Supply: P=2+Q_S

Please draw demand and supply into the following diagram.

Question 16(1 point)

Saved

What is the demand function?

Question 16 options:

Q_D=8-P

Q_D=8+P

Q_D=8+P

Q_D=8-2P

Question 17(1 point)

Saved

What is the supply function?

Question 17 options:

Q_S=2-P

Q_S=2+P

Q_S=-2+P

Q_S=-2-P

Question 18(1 point)

Saved

Assume the government sets the price at P_G=6. Then, this price would be a

Question 18 options:

price ceiling

maximum price

Both a. and b.

Price floor

Question 19(1 point)

Saved

Assume the government sets the price at P_G=6. Then, quantity demanded will be

Question 19 options:

Q_D=1

Q_D=2

Q_D=3

Q_D=4

Question 20(1 point)

Saved

Assume the government sets the price at P_G=6. Then, quantity supplied will be

Question 20 options:

Q_S=1

Q_S=2

Q_S=3

Q_S=4

Question 21(1 point)

Saved

Assume the government sets the price at P_G=6. Then, excess ______ will be _____ .

Question 21 options:

demand, 1

demand, 2

supply, 1

supply, 2

Question 22(1 point)

Saved

Assume the government sets the price at P_G=6. Then, the quantity turned over in the market (goods supplied by producers and purchased by consumers) will be

Question 22 options:

Q_TO=1

Q_TO=2

Q_TO=3

Q_TO=4

Question 23(1 point)

Assume the government sets the price at P_G=6. Then, consumer surplus will be

Question 23 options:

CS=1

CS=2

CS=3

CS=4

Question 24(1 point)

Assume the government sets the price at P_G=6. Then, producer surplus will be

Question 24 options:

PS=1

PS=2

PS=4

PS=6

Question 25(1 point)

Assume the government sets the price at P_G=6. Then, welfare will be

Question 25 options:

W=2

W=4

W=8

W=10

Question 26(1 point)

Assume the government sets the price at P_G=6. Then, compared to the free market equilibrium, the dead weight loss is equal to

Question 26 options:

DWL=0.5

DWL=1

DWL=1.5

DWL=2

Question 27(1 point)

Assume the government sets the price at P_G=6. Then, compared to the free market equilibrium, which statement is true? In absolute terms,

Question 27 options:

the producers win less than what the consumers lose

the price of P_G=6 leads technically to a redistribution of welfare from consumers to producers

Both a. and b. are correct

the consumers win more than what the producers lose

The next questions refer to the following scenario:

The (inverse) demand and supply functions are:

Demand: P=8-Q_D

Supply: P=2+Q_S

Please draw demand and supply into the following diagram.

Question 28(1 point)

The market equilibrium consists of which equilibrium price P*, equilibrium quantity Q*, and Welfare W*?

Question 28 options:

P*=3, Q*=5, W*=8

P*=5, Q*=3, W*=12

P*=5, Q*=3, W*=9

P*=4, Q*=4, W*=9

Question 29(1 point)

Now assume that the government subsidizes supply by S=2. What is the new inverse supply function (S+Subsidy)?

Question 29 options:

P=Q

P=1+Q

P=3+Q

P=4+Q

Question 30(1 point)

Now assume that the government subsidizes supply by S=2.What is the new market clearing price and quantity after the subsidy?

Question 30 options:

Q*=4, P*=5

Q*=4, P*=4

Q*=3, P*=4

Q*=5, P*=3

Question 31(1 point)

Now assume that the government subsidizes supply by S=2.How big is the new consumer surplus?

Question 31 options:

CS=6

CS=8

CS=12

CS=16

Question 32(1 point)

Now assume that the government subsidizes supply by S=2.How big is the new producer surplus?

Question 32 options:

PS=6

PS=8

PS=12

PS=16

Question 33(1 point)

Now assume that the government subsidizes supply by S=2.How much does the subsidy cost the taxpayer?

Question 33 options:

Cost=4

Cost=6

Cost=8

Cost=10

Question 34(1 point)

Now assume that the government subsidizes supply by S=2.How big is the new total surplus (welfare)?

Question 34 options:

TS=16

TS=12

TS=8

TS=6

Question 35(1 point)

Now assume that the government subsidizes supply by S=2.How big is the dead weight loss?

Question 35 options:

1

2

3

4

Question 36(1 point)

The dead weight loss associated with a subsidy is best explained by

Question 36 options:

inefficient underproduction

inefficient overproduction

irrational management

irrational consumer behavior

Price_Theory

01_Cost_Function

A typical firm has the total cost function

TC=2q

3

4q

2

+4q+72

{"version":"1.1","math":"$TC=2q^3-4q^2+4q+72$"}

Question 37(1 point)

The marginal cost function is

Question 37 options:

MC=2q

2

4q+4+72

q

{"version":"1.1","math":"$MC=2q^2-4q+4+\frac{72}{q}$"}

MC=2q

2

4q+4

{"version":"1.1","math":"$MC=2q^2-4q+4$"}

MC=6q

2

8q+4

{"version":"1.1","math":"$MC=6q^2-8q+4$"}

None of the above.

Question 38(1 point)

The average variable cost cost function is

Question 38 options:

AVC=2q

2

4q+4+72

q

{"version":"1.1","math":"$AVC=2q^2-4q+4+\frac{72}{q}$"}

AVC=2q

2

4q+4

{"version":"1.1","math":"$AVC=2q^2-4q+4$"}

AVC=6q

2

8q+4

{"version":"1.1","math":"$AVC=6q^2-8q+4$"}

None of the above.

Question 39(1 point)

The average total cost cost function is

Question 39 options:

ATC=2q

2

4q+4+72

q

{"version":"1.1","math":"$ATC=2q^2-4q+4+\frac{72}{q}$"}

ATC=2q

2

4q+4

{"version":"1.1","math":"$ATC=2q^2-4q+4$"}

ATC=6q

2

8q+4

{"version":"1.1","math":"$ATC=6q^2-8q+4$"}

None of the above.

02_Perfect_Competition

Assume that the typical firm operates under perfect competition. The market price is currently at P=114.The (inverse) market demand function is P=154-4Q.

Question 40(1 point)

What quantity will the typical firm supply at a price of P=114?

Question 40 options:

2

3

4

5

Question 41(1 point)

How much profit does the typical firm make at a price of P=114?

Question 41 options:

0

120

328

648

Question 42(1 point)

How many firms will be in the market when the price is P=114?

Question 42 options:

1

2

3

4

Question 43(1 point)

What will be the long run equilibrium price?

Question 43 options:

2

12

34

68

Question 44(1 point)

What quantity will the typical firm supply in the long run equilibrium?

Question 44 options:

1

2

3

4

Question 45(1 point)

How many firms will be in the market in the long run equilibrium?

Question 45 options:

8

10

12

15

03_Monopoly

Now assume that the typical firm operates as a monopolist that faces the demand function P=72-0.5Q.

Question 46(1 point)

What is the monopolist's marginal revenue function?

Question 46 options:

MR=72-0.25Q

MR=72-Q

MR=72-2Q

MR=72-4Q

Question 47(1 point)

What profit maximizing quantity does the monopolist choose?

Question 47 options:

3

4

5

6

Question 48(1 point)

What is the profit maximizing price?

Question 48 options:

70

68

66

64

Question 49(1 point)

What is the monopolist's profit?

Question 49 options:

98

108

118

128

Question 50(1 point)

What is the point price elasticity of demand at the profit maximizing price?

Question 50 options:

-8

-10

-12

-14