Question

Closed book and closed notes.

3. Basic Calculators are permitted.

4. Read all instructions and questions carefully.

5. Show all your work.

6. Please place your Coquitlam College Identification Card
face up and visible on your desk.

7. Electronic devices including cellular phones must be turned
off and put away during the exam.

8. Any student who has a cell phone or other unauthorized
electronic device (i.e. laptop, and et cetera.) on their person or
around their desk during this exam will be guilty of cheating and
receive an "F" for the course.

QUESTION

MARKS EARNED

MARKS AVAILABLE

1

10

2

10

3

10

4

10

5

30

TOTAL

70

QUESTION 1 (10 Points)

Answer each of the following questions by drawing a graph that
represents the initial equilibrium condition and the resulting new
situation from the effect. Label the graphs carefully and provide a
written explanation as well.

a. Consider the market for reusable coffee mugs that is
initially in a market equilibrium. Suppose that a more efficient
production process has been developed, which reduces the cost of
production and that people are now more aware of environmental
impacts so they try to reduce and reuse. Given these events, what
will happen to the equilibrium price and quantity in the market for
coffee mugs?

b. Consider the market for hoodies that is initially in a
market equilibrium. Suppose that hoodies are becoming more popular,
while concurrently, the number of people that plan to purchase any
hoodies decreases. Given these events, what will happen to the
equilibrium price and quantity in the market for hoodies?

QUESTION 2 (10 Points)

Answer each of the following questions by providing a written
explanation.

a. The price elasticity of demand for pencils is equal to 1.
What does the statement mean if the price of a pencil decreases by
20%? What type of good is a pencil?

b. The income elasticity of demand for pencils is equal to 2.
What does the statement mean if income increases by 10%? What type
of good is a pencil?

c. The cross price elasticity of demand for pencils and pens
is +2. What does the statement mean if the price of a pen decreases
by 5%? What is the relationship between the two goods?

d. The cross price elasticity of demand for pencils and
erasers is -3. What does the statement mean if the price of an
eraser increases by 10%? What is the relationship between the two
goods?

QUESTION 3 (10 Points)

Answer each of the following questions by determining if the
statement is true or false and provide your reasoning.

a. The price elasticity of demand for gasoline in the short
term is more elastic than it would be in the long term.

b. The price elasticity of wine is more elastic for a
low-income individual than a high-income individual.

c. The burden of a tax is higher on the consumer if the demand
is elastic and the supply is inelastic.

d. When the ceiling price is below the equilibrium price, then
the change in producer surplus is positive.

QUESTION 4 (10 Points)

Answer each of the following questions by showing any
calculations required or by providing a written explanation.

Suppose that in a year a European car manufacturer can produce
600,000 sedans or 100,000 trucks, while a Canadian car manufacturer
can produce 300,000 sedans or 300,000 trucks.

a. (2 points) The two countries are currently not engaged in
international trade. Suppose that each country allocate half a year
in the production of each good, what will be the total world
production of cars and trucks in a year?

b. (4 points) What is the opportunity cost of producing a
sedan in terms of a truck and the opportunity cost of producing a
truck in terms of a sedan for both countries?

c. (2 points) Which country should specialize in sedan? In
trucks?

d. (2 points) If both countries were to specialize and open to
trade, what will be the total world production of cars and trucks
in a year?

QUESTION 5 (30 Points)

Answer each of the following questions by showing any
calculations required or by providing a written explanation.

Jasper works for the government and his job is to analyze the
market for apples. He found that the market demand function for
apples is QD = 50 - 5p and the market supply for apples is QS = 10
+ p, where Q is the quantity of apples demanded/supplied and p is
the price of apple per pound. The government is looking to limit
the production of apples and is considering various intervention
options.

a. (3 points) Suppose that John initially does not know the
demand function nor the supply function for applies, but he has the
following information through observing the market. He notice that
when the price of apples increased from $4.00 to $4.10 per pound,
the quantity of applies demanded fell from 30 to 28 pounds. What is
the elasticity of demand for apples? Is it elastic, unit-elastic,
or inelastic? Using this estimate, by how much would price increase
if the quantity demanded to be restricted to 20 pounds from 25
pounds (a 20% decrease in the quantity demanded of apples)

b. (9 points) Given the demand and supply functions, determine
the current equilibrium price and quantity for apples. Graph the
market equilibrium for apples. What is the consumer surplus (CS),
producer surplus (PS), total surplus (TS), government revenue (GR),
and dead weight loss (DWL) at the equilibrium?

c. (8 points) The first option is to implement a production
quota that restricts the production of apples from the current
equilibrium supply to 20 pounds of apples. What is the consumer
surplus (CS), producer surplus (PS), total surplus (TS), government
revenue (GR), and dead weight loss (DWL) with this quota? Show the
effects of the quota on a diagram, and label the welfare measures,
if applicable.

d. (8 points) The other option is to implement a tax of $2.67
on the producer. What is the consumer surplus (CS), producer
surplus (PS), total surplus (TS), government revenue (GR), and dead
weight loss (DWL) with this tax on the producer? Show the effects
of the tax on a diagram, and label the welfare measures, if
applicable.

e. (2 points) Which government intervention (a quota or a tax)
would the consumers and the producers prefer, if they had to
choose?

Answer #1

**Question1**

**(a)** After environment
awareness equilibrium quantity and price of mugs decreases to Q'
and P' respectively. And equilibrium point shifts down and becomes
E'.

(**b**) After the popularity demand curve shifts to
DD' and equilibrium point become E'. Equilibrium price and quantity
increases to P' and Q' respectively.

Plase read the question carefully, the number is different. And
please answer each question thank you. Please do not copy another
question answers
in a perfectly competitive market, the market demand curve is
given by Q = 50 − 2P , and the market supply curve is given by Q =
3P .
a) Find the equilibrium price and quantity demanded.
b) Find the consumer and producer surplus.
c) Determine the net economic benefit.
Now suppose we impose a price...

Suppose the market demand curve for a product is given by
QD=100-5P and the market supply curve is given by
QS=5P
a. What are the equilibrium price and quantity?
b. At the market equilibrium, what is the price elasticity of
demand?
Suppose government sets the price at $15 to benefit the
producers.
What is the quantity demanded?
What is the quantity supplied?
What is the amount of the surplus?
Suppose market demand increases to Qd=200-5P.
What is the new equilibrium...

The market for apples is perfectly competitive, with the market
supply curve is given by P = 1/8Q and the market demand curve is
given by P = 40 – 1/2Q.
a. Find the equilibrium price and quantity, and calculate the
resulting consumer surplus and producer surplus. Indicate the
consumer surplus and producer surplus on the demand and supply
diagram.
b. Suppose the government imposes a 10 dollars of sale tax on
the consumer. What will the new market price...

1. Consider a small open economy. Suppose the market for corn in
the Banana Republic is competitive. The domestic market demand
function for corn is Qd = 10 − 0.5P and the domestic market supply
function is Qs = P − 2, both measured in billions of bushels per
year. Also, assume the import supply curve is infinitely elastic at
a price of $4 per bushel.
(a) Suppose the government imposes a tariff of $2 per bushel.
What will the...

Demand for sugar: Q = 18-P
Supply of sugar: Q = 4+P
Quantities are in million hundredweight (cwt.) and the price is
in dollars per cwt.
1. What is the equilibrium price and quantity of sugar in the
absence of any agricultural policy?
2. If the government establishes a support price for sugar of $9
per cwt. (hundred pounds) and is willing to purchase any surplus
sugar at that price, indicate on your graph the quantity supplied,
quantity demanded, and...

1. [Market Equilibrium]
Following table shows information about the demand for apples in
the wholesale market.
Price, P ($/lb) Quantity Qd (lbs)
10/0
8/4
6/8
4/12
2/16
(a) Draw a graph with Price (P) on the vertical axis and
Quantity demanded (Qd) on the horizontal axis?
(b) Write the equation for this inverse demand function.
(c) What is the quantity demanded when P = $3/lb? Following
table shows information about the supply of 20 lbs box of apples in
the...

Suppose that the (inverse) demand for Sugar in the US is given
by, P= 75-2 Qd
where P = price per bulk bag (in dollars) and Qd =
quantity demanded (in millions of bulk bags).
Suppose the (inverse) supply of sugar is given by, P= 3
Qs
where P = price per bulk bag (in dollars) and Qs =
quantity supplied (in millions of bulk bags).
a.) Find the equilibrium price and quantity of sugar exchanged
in the US market,...

Below you will find a supply and demand schedule for avocados.
Assume that the market is otherwise competitive and in equilibrium.
Then let the government institute a price floor at $7. You are to
illustrate this outcome; title your graph and draw supply and
demand , denote the efficient price and quantity, and exhibit the
price floor . Be sure to label deadweight loss , consumer surplus,
producer surplus , and any surplus or shortage that results .
Calculate the...

Following table shows information about the demand for apples
in the wholesale mar-
ket.
Price, P ($/lb) Quantity Qd (lbs)
10. 0
8. 4
6 8
4. 12
2 16
(a) Draw a graph with Price (P) on the vertical axis and
Quantity demanded (Qd) on
the horizontal axis?
(b) Write the equation for this inverse demand function.
(c) What is the quantity demanded when P = $3/lb?
Following table shows information about the supply of 20 lbs
box of...

Problem 3
The following table shows the supply and demand schedules in a
market. Show all your work and discuss the following
questions.
Price ($)
Quantity
Demanded
(units)
Quantity
Supplied
(units)
0
50
0
2
40
15
4
30
30
6
20
45
8
10
60
10
0
75
What is the equilibrium price in this market? Equilibrium
Quantity? Why?
At a price of $2, will there be a surplus or shortage of units
in this market? Why?
At a...

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