Question 1

If a price of corn is $3.00 a bushel, 5,000 bushels would be demanded. If the price rises to $4.00 a bushel, 4,000 bushels would be demanded.

a. What is the (arc) price elasticity of demand?

b. Based on this answer if the price of corn rose to $5.00 a bushel, what would be the demand for corn?

c. If the price of corn decreased from $4.00 to $3.00 a bushel, what would be the change in total revenue for sellers of corn?

d. If the price of corn increased from $4.00 to $5.00 a bushel, what would be the change in total revenue for sellers of corn?

Question 2

Industry supply and demand are given by:

QD = 1000 - 2P and QS = 3P

a. What is the equilibrium price and quantity?

b. At a price of $100, will there be a shortage or a surplus, and how large will it be?

c. At a price of $300, will there be a shortage or a surplus, and how large will it be?

Question 3

You are told that the price elasticity of demand for widgets is -0.75, the income elasticity of

widgets are 2, and the cross-price elasticity of widgets and gadgets is 4. Carefully explain what

information you can gather from each of these figures.

Question 4

If a good's demand function is: Q = 30 - 3P, then calculate the price elasticity of demand

when

a. good price is $3 using the point elasticity formula

b. good price is $4 using the point elasticity formula

c. good price decreases from $4 to $3, using the arc elasticity formula

d. good price is $5, using the point elasticity formula

e. good price increases from $4 to $5, using the arc elasticity formula

Question 5

Annual demand and supply for an electronic company is given by:

QD = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5000 + 100P

where Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.

a. If A = $10,000 and I = $25,000, what is the demand curve?

b. Given the demand curve in part a., what is equilibrium price and quantity?

c. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?

Question 6

Number Of Workers	Output
0	0
1	50
2	110
3	300
4	450
5	590
6	665
7	700
8	725
9	710
10	705

1) The table above shows the weekly relationship between output and number of workers for a

factory with a fixed size of plant.

a. Calculate the marginal product of labor.

b. At what point does diminishing returns set in?

c. Calculate the average product of labor.

d. Find the three stages of production.

Question 7

For each of the following changes, show the effect on the demand curve, and state what will

happen to market equilibrium price and quantity in the short run.

a. Consumers expect that the price of the good will be higher in the future.

b. The price of a substitute good rises.

c. Consumer incomes fall, and the good is normal.

d. Consumer incomes fall, and the good is inferior.

e. A medical report is published showing that this good is hazardous to your health.

f. The price of the good rises.