Econ 545 Week 3 Quiz Imperfect Competition

ECON 545 Week 3 Quiz Imperfect Competition

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1.

Question :

(TCO A) There is a decrease in the cost of labor for producing bicycles.

(4 pts.) What happens to bicycle supply?

(6 pts.) What happens to bicycle demand?

2.

Question :

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2. (TCO A) Ceteris paribus, Diet Cola Brand X and Diet Cola Brand Y are substitutes in consumption. The price of Diet Cola Brand Y falls.

(4 pts.) a. What happens to the demand for Diet Cola Brand X?

(6 pts.) b. What happens to the demand for Diet Cola Brand Y? (Points : 10)

3.

Question :

(TCO A) The number of new home sellers in a given market decreases.

(4 pts.) What happens to the supply of new homes?

(6 pts.) What happens to the demand for new homes?

4.

Question :

(TCO A) A market is in equilibrium with equilibrium Quantity of MEQ and equilibrium Price of MEP.

(2 pts.) a. What happens to market equilibrium Price (MEP) if there is an increase in Demand?

(4 pts.) b. What happens to market equilibrium Quantity (MEQ) if Supply decreases as Demand increase?

(4 pts.) c. What happens to market equilibrium Price if there is an increase in Supply followed by a decrease in Demand which if followed by another increase in Supply?

5.

Question :

5.

The following table shows part of the demand function for tickets to an outdoor summer concert by a popular singing group:

Price (P)...Quantity (Q)

50........... 100

35.......... 180

20............300

10............500

a. (2 pts.) What is demand elasticity in the $35 - $50 price range? Is demand elastic, inelastic, or of unitary elasticity? Calculate the value and show all of your work. Be sure to use the midpoint equation to determine elasticity.

b. (4 pts.) Assume demand elasticity is 1.0 in the $20 - $35 price range. In this range of demand, by what percentage would quantity demanded change if price decreases by 5 percent? Show your detailed calculations...