This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

3 Unit Homework Problem 1: Suppose that the supply schedule of Belgium Cocoa beans is as follows: Price of cocoa Quantity of cocoa beans beans supplied (per pound) (pounds) $40 700 $35 600 $30 500 $25 400 $20 300 Suppose that Belgium cocoa beans can be sold only in Europe. The European demand schedule for Belgium cocoa beans is as follows: Price of Belgium cocoa Quantity of Belgium cocoa beans beans demanded (per pound) (pounds) $40 100 $35 300 $30 500 $25 700 $20 900 a. Draw the demand curve and the supply curve for Belgium cocoa beans. What are the equilibrium price and quantity of cocoa beans from Belgium? Now suppose that Belgium cocoa beans can be sold in the U.S. The U.S. demand schedule for Belgium cocoa beans is as follows: Price of Belgium cocoa Quantity of Belgium cocoa beans beans demanded (per pound) (pounds) $40 200 $35 400 $30 600 $25 800 $20 1000 b. What is the demand schedule for Belgium cocoa beans now that U.S. consumers can also buy them? Quantity of Belgium Quantity of Belgium Price of Belgium cocoa beans cocoa beans Total Demanded cocoa beans demanded demanded (per pound) (pounds) (pounds) (pounds) $40 200 100 300 $35 $30 $25 $20 400 600 800 1000 300 500 700 900 700 1100 1500 1900 Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of cocoa beans from Belgium. What will happen to the price at which Belgium plantation owners can sell beans? What cocoa will happen to the price paid by European consumers? What will happen to the quantity consumed by European consumers? Problem 2 On Tuesday nights, a local restaurant has a kids meal special. Ninas son, Braden likes the restaurants chicken nuggets, but Braden seems to be growing bigger every day and the kids meal is usually not enough. The restaurant does allow for additional purchase of chicken nugget servings. Ninas willingness to pay for each serving is shown in the table below. Number of Chicken Nugget Willingness to pay for chicken servings nuggets (servings) (per serving) 1 $5 2 $4 3 $3 4 $2 5 $1 6 $0 a. If the price of an additional serving of chicken nuggets is $3, how many servings will Nina buy for Braden? How much consumer surplus does he receive? b. The following week, Nina and Braden are back at the restaurant again, but now the price of a serving of chicken nuggets is $4. By how much does his consumer surplus decrease compared to the previous week? c. One week later, they return to the restaurant again. Nina discovers that the restaurant is offering an all-you-can-eat special for $12. How many chicken nugget servings will Braden eat, and how much consumer surplus does he receive now? d. Suppose you own the restaurant and Braden is a typical customer. What is the highest price you can charge for the all-you-can-eat special and still attract customers? ... View Full Document

End of Preview

Sign up now to access the rest of the document