1. True or False: If the demand curve for a good is price inelastic, an inward shift in the supply curve for the good (less supplied at every price) will increase the total revenue of suppliers. You must provide an explanation for your answer.

2.Because of a new pipe line from Canada, the supply of natural gas to Connecticut has increase by 10% and the price of natural gas has fallen by 5%. What can you say about the price elasticity of supply? What can you say about the price elasticity of demand?

3.Students attending Eastern can live either near the campus in Warrior Town or ten miles away from campus in the town of Huskyville. Students who live in Huskyville commute by bus each day to campus. Assuming the Laws of Supply and Demand hold in the housing makers in both communities, what will be the effect of an increase in bus fares on apartment rents in the two communities? Please support your answer both graphically and using words.

4.Pedro lives in the dorms and works as a barista at Starbucks. He earns $15 an hour and can work as many hours as he wants. He is considering the possibility of selling coffee to this dorm mates. His mother gave him an espresso machine when he left home for college. He can brew 30 cups of coffee an hour. He would buy the coffee grounds from a local retailer. The cost of the grounds for a cup of coffee would average $0.10 per cup. What is the opportunity cost for Pedro to sell a cup of coffee to one of this dorm mates?

5.The demand curve for a good is downward sloping and the supply curve is upward sloping. How would a tax on each unit of the good sold affect the price buyers pay and the price sellers receive and the quantity sold?

6.True/False:If a household has chosen amounts of two commodities to maximize its utility subject to its budget constraint and the marginal utilities of those two goods are equal, their prices must also be equal.

7.Albert has $15 to spend each week on coffee and donuts.The price of a cup of coffee is $2, and the price of a donut is $1. If Albert bought 6 cups of coffee and 3 donuts in a week, the marginal utility of coffee would be 120, and the marginal utility of donuts would be 60. To maximize his utility, how should Albert modify his consumption?

(a) Buy more cups of coffee and fewer donuts

(b) Buy fewer cups of coffee and more donuts

(c) Don't change anything. He is already maximizing utility.

(d) Buy more of both goods.

(e) Buy less of both goods.

8.Ruth has inverse demand for wine given byp= 100q. If the price of wine changes from $20 to $40, how does her consumer surplus change?

9. Rebecca likes to eat Taco Bell. Her inverse demand for tacos isp= 102q. What is the change in Rebecca's consumer surplus if the price of a taco rises from $4 to $6?