Question

1. Consider the individual supply and demand schedules below: a. In the below chart, sum the market supply and demand for cookies: b. Use the above Market Demand and Supply Schedule to draw the supply and demand curves. Indicate the market equilibrium price and quantity. c. Draw the effect of an increase in the price of milk, a compliment to cookies, on the cookie market. Describe if and how this changes equilibrium quantity and price. d. What effect does the change in the price of milk have on Consumer Surplus? (20 points)

Price	Cerise	Amonette	Rose	Market Demand	Tollhouse	Girl Scouts	Market Supply
$0	8	5	4		0	0
$1	6	4	3		2	1
$2	4	3	2		4	5
$3	2	2	1		7	6
$4	1	1	0		8	10

2. A coffee shop has a total of 200 hours of labor per day to produce any one good; producing a cup of coffee takes one hour of labor and producing a cookie takes 5 hours of labor. Use this information to complete the table below, and draw the Production Possibilities Frontier for the coffee shop. First, draw a point that is impossible to produce, and label it ‘A’, then draw a point that is inefficient and label it ‘B’. Finally, select a point at which you and label it ‘C’. (10 points)  

Cookies	Coffee
	0
30
	100
10
	200

would choose to produce, and label it ‘C’. (10 points)

Answer 1