College of Saint Mary Equilibrium Price Questions Principles of Microeconomics Question 1. Use the supply and demand equations below to answer the follow

College of Saint Mary Equilibrium Price Questions Principles of Microeconomics

Question 1.

Use the supply and demand equations below to answer the following questions:

QS = 2,000P – 10,000 (or P = 5 + 1/2000 QS)

QD = 20,000 – 1,000P (or P = 20 -1/1000 QD)

(Show all calculations)

Solve for the equilibrium price and quantity in the market. [2 marks]
Illustrate these curves on a graph, labelling the curves, intercepts and equilibrium price and quantity. [2 marks]
Suppose a price floor is set at P = $12 per unit, what is the new quantity demanded and supplied? Because of the price floor, what is the amount of the shortage or surplus in the market? [2 marks]
On your diagram, show the price floor, identify the area representing the deadweight loss imposed on society and identify the share of consumer surplus transferred to producers. [2 marks]

Question 2.

Use the following figure, which shows the market for muffins per day, to determine:

What are the equilibrium price and equilibrium quantity of muffins? [1 mark]
In equilibrium, calculate the value of consumer and producer surplus. [2 marks]
To improve the health of the population, the government introduces a daily quota of 2,000 muffins per day, what is the new price consumers pay? [1 mark]
What is the value of consumer surplus after the quota is introduced? [1 mark]
What is the value of the Deadweight Loss? [1 mark]
If instead of a quota, the government introduces a per unit tax on muffins which reduces the quantity consumed daily to 2,000, what is the size of the per unit tax? Show the impact of the tax by drawing the after-tax supply curve on the diagram.[2 marks]
How is the incidence of the tax distributed between consumers and sellers? [1 mark]
How much tax revenue will the government collect? [1 mark]
As a seller, would you prefer the government to impose a quota or a tax on muffins? Briefly explain.

[2 marks]

Question 3.

Use the following data on the demand and supply schedules of teenage labour to determine:

Wage rate
(dollars per hour)

Quantity demanded

Quantity
supplied

(hours per month)

8

2,500

1,500

10

2,000

2,000

12

1,500

2,500

14

1,000

3,000

The equilibrium wage rate, the hours worked, and the quantity of unemployment. [1 mark]
The hours worked when the government introduces a minimum wage of $12 an hour? [1 mark]
As a result of (b), what happens to the quantity of unemployment in terms of hours? [1 mark]
If the demand for teenage labour increases by 500 hours a month, how many hours are unemployed? [1 mark]

Question 4.Suppose Noah receives 400 units of utility from his last soda and 200 units of utility from his last slice of pizza. If the price of a soda is $1 and the price of a slice of pizza is $2, given Noah’s current consumption choices is he maximizing his utility? Explain what he should or should not do. [2 marks]

Question 5. Use the following table, which shows Lisa’s total utility from burritos and pizza.

Burritos

Pizza

Quantity per week

Total utility

Pizza
per week

Total utility

0

0

0

0

1

10

1

20

2

18

2

36

3

25

3

48

4

31

4

56

5

36

5

60

6

40

6

62

When Lisa buys 3 burritos and 2 pizza a week, what is her total utility and her marginal utility from the third burrito? If the price of a burrito is $4, what is her marginal utility per dollar from burritos? [1 mark]
When the price of a burrito is $4, the price of a pizza is $8, and Lisa has $24 a week to spend, she buys 2 burritos and 2 pizza. Does she maximize her total utility? Explain your answer. [2 marks]
When the price of a burrito is $4, Lisa has $24 to spend, and the price of pizza falls from $8 to $4, how many burritos and pizza does Lisa buy? What are two points on Lisa’s demand curve for pizza? [3 marks]