Microeconomics

Question 1: Assume that the market for coffee is perfectly competitive. Using diagrams, determine the impact on short-term, equilibrium price and quantity in the coffee market for each of the following:

a) The coffee crop is a bumper crop (excellent harvest).

b) There is news of the health benefits of coffee.

c) The price of green tea decreases.

d) There is political instability (war) in the world’s largest coffee producing country negatively impacting farmers and trade.

e) There is a spike in the popularity of energy drinks and the price of milk decreases.

Question 2: The following data are the market supply and demand schedules for Economics Study Guides, which are products in a competitive market.

a) Graphically, construct the supply and demand schedules and determine the equilibrium price and quantity.

The equilibrium price is $30 and the equilibrium quantity is 600 units.

b) Suppose a tax of $ 10 per textbook (guide) is imposed on the producers. What will be the new equilibrium price paid by the consumers and the quantity of textbook demanded after the tax has been imposed? What will be the price the producers receive after the tax has been imposed? Would your answer change if the tax were imposed on the consumer instead of the producers? Explain.

Question 3: The table gives a relationship between the workers and monthly production of golf carts.

Other Information:

• Fixed Costs are $ 5000 per month

• 1 worker is $ 3000 per month

a) Complete the following table. (note: that the marginal product and marginal cost should be entered midway between rows to emphasize that it is the resulting changing inputs/output – moving from one row to the next. Average product, total costs and average costs corresponds to fixed quantity of labour and should be entered in the appropriate row).

b) Plot both the marginal product and average product – recall marginal product should be plotted midway between the corresponding units of...