Question 1

Fei, Morgan and Lakesha are all in the market for new Levi's jeans. The marginal benefits for each pair of Jeans per year. Each of them is provided in the following table.

a. If the price of a pair of Levi's jeans is $32, how many pairs of jeans will each person purchase?

b. How much consumer surplus does each of them receive from the last pair of jeans purchased?

c. How much consumer surplus will each of them receive for each of the pairs they buy at a price of $32?

Quantity	Fei	Morgan	Lakesha
1	$85	$40	$90
2	$60	$32	$75
3	$32	$24	$55
4	$20	$16	$32
5	$15	$8	$25

Question 2

Roland has started his own line of perfumes. Each of his bottles of perfume is priced at $5. The table shows his supply plan with marginal cost, how many bottles of perfumes should he produce?

Bottles of Perfume	Marginal Cost ($)
1	5
2	8
3	10
4	6
5	2

Question 3

David wants to buy a new laptop because he loves gaming. He goes online to look for options, mentally deciding that his budget is $2,500. When he goes online he sees three laptops, A, B, and C. Laptop A costs $4,000, Laptop B costs $2,000, and Laptop C costs $1,500.

1. What is his economic surplus for each laptop?
2. Based on economic surplus, which laptop should he buy?

Question 4

Beverly is planning a summer vacation and is about to book a hotel room online for $149 a night. However, when she gets to the reservation screen, you are informed that she will be charged an additional $30 a night in various taxes that she has to pay to the hotel.

1. Between Beverly and the hotel, who is carrying the larger share of the

economic burden of the taxes?

1. What ultimately determines whether Beverly or the hotel bears the majority of the economic burden?

Question 5

The U.S. government provides subsidies for a variety of agricultural products.

In the absence of government involvement, what are the equilibrium price and quantity in the market for corn if the demand and supply for corn are as given in the accompanying graph?

1. If the government offers a $2 per unit subsidy to the suppliers of corn, what happens to the price consumers pay inclusive of the subsidy?

1. What price will suppliers receive, inclusive of the subsidy?

Use a graph to illustrate the effect of this subsidy.

Rent Quantity demanded Quantity supplied $2,000 5,000 13,000 $1,800 8,000 12,000 $1,600 11,000 11,000 $1,400 14,000 10,000 $1,200 17,000 9,000Price ($ per bushel of corn) $10.00 $9.00 $8.00 $7.00 $6.00 Supply $5.00 $4.00 $3.00 $2.00 Demand $1.00 0 4 8 12 16 20 24 28 32 36 40 Quantity of corn (billions of bushels) Stevenson/Wolfers, Principles of Economics, le, @ 2020 Worth Publishe