Part I - Short Answer Questions

1.If you were to estimate the potential demand for a new online market you want to operate, what methods of estimation you may use? What variables do you consider?

2.Identify three businesses that would boom post- COVID-19. What do you think about the demand for these businesses (products or services)? What is the determinant factor that drives upward the demand for these products and services?

3.What would be the impact of imposing a price floor below the equilibrium price?

4.By taking a case of Ethiopian Government involvement in price adjustment (Price Ceiling) in the recent past, answer the following questions. (Please refer sources like media (print media like newspapers or magazines, published reports and put as reference)

a.Explain causes, the consequence, and success of the adjustment decision of government?

b.What is the effect on the price, quantity demanded of the product, and quantity supplied?

c.Why exactly does a price ceiling cause a shortage?

Part II - Problems and Application

1.A firm's demand curve in period 1 is Q=25 - P. Fixed costs are 20 and marginal costs per unit are 5.

a.Derive equations for total revenue and marginal revenue.

b.At what output will marginal revenue be zero?

c.At what price will total revenue be maximized?

d.At what price and output will profit be maximized?

e.Calculate the maximum profits the firm makes.

2.Ethio-telecom estimated the demand and supply for mobile data packages in MB per day as Qd=50-2P and P=Qs/2+5. With the introduction of new telecom service providers, the price is expected to be 5 cents per MB.

a.Estimate the equilibrium price and quantity

b.What would happen to the market at the new prices of 5 cents?

c.Compare the price, the demand, and the supply before and after the introduction of the new service provider