Question

1)

A firm’s demand equation is given by: Qd = 60 – 60P + 2Y, where Qd is quantity, P is price, and Y is income. If price increases by $2 and income increases by $80, then quantity demanded will:

Answers:

increase by 160 units.

increase by 80 units.

decrease by 120 units.

increase by 40 units.

decrease by 60 units.

2)

The demand function for pork is Q^d = 300 – 100P
+ 0.01INCOME
where Q^d is the tons of pork demanded in your city per week, P is the price of a pound of pork, and INCOME is the average household income in the city. The supply function for pork is Q^s = 200 + 150P – 30COST where Q^s
Is the tons of pork supplied in your city per week and COST is the cost of pig food.
If INCOME is $50,000 and COST is $5, what is the equilibrium price and quantity of pork?

Answers:	$1, 200.
	$1, 700.
	$3, 300.
	$3, 400.
	$3, 500.

3)

If the cost to produce Megan's frozen chicken nuggets decreases at the same time as consumer tastes shift away from frozen chicken nuggets and the shift in supply is greater than the shift in demand, which of the following is true?

Answers:	both the equilibrium quantity and price will decrease.
	both the equilibrium quantity and price will increase.
	the equilibrium price will decrease and the equilibrium quantity will increase.
	the equilibrium price will decrease and the equilibrium quantity will not change.

4)

A price ceiling is a _______ legal price set by the government that causes a ________ in the market.

Answers:	maximum; shortage
	maximum; surplus
	minimum; shortage
	minimum; shortage

Answer 1

1) Q = 60-60P+2Y

TotaIIy differentiate Q we get

dQ = -60*dP +2*dY

dQ = -60*2 + 2*80 = -120+160

dQ = 40, increases by 40 units.

The correct answer is option D).

2) Demand: Q = 300 – 100P + 0.01INCOME

SuppIy : Q = 200+150*P -30*COST.

Put INCOME = $50,000. And COST = $5 in the demand and suppIy function respectiveIy.

At equiIibrium: Demand =SuppIy

800-100P = 50 +150P

750 =250P. P= $3, Q = 500

The correct option is E)

3) The correct answer is option B)

4) The correct option is C) because price ceiIing is aIways beIow the equilibrium price. Thus, demand is greater than suppIy.