Quiz_2_Ec182A_Version_1_Answers

Quiz_2_Ec182A_Version_1_Answers - STATE UNIVERSITY OF NEW...

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STATE UNIVERSITY OF NEW YORK AT BUFFALO DEPARTMENT OF ECONOMICS Economics 182A, Spring 2008 Answers to Quiz Two, Version One. Question 1. The market for pens is perfectly competitive. The market demand for pens is Q D = 2000 - 200 p pens. The market supply of pens is Q S = - 100 + 100 p pens. (i) At what price will pens be traded? Remember to state the unit of measurement. Answer: The market price p e for pens equalizes the quantity demanded of pens and the quantity supplied of pens; that is, 2000 - 200 p e = - 100 + 100 p e . The market-clearing price p e = $7 per pen. (3 points – 1 point for stating that quantity demanded and quantity supplied must be equal, 1 point for correctly computing the market-clearing price, and 1 point for correctly stating the unit of measurement.) (ii) How many pens will be traded? Answer: At a price of $7 per pen the quantity demanded of pens is 600 pens and the quantity supplied of pens is 600 pens. Therefore 600 pens are traded. (1 point for correctly computing the quantity traded.) Question 2. Suppose that the number of firms producing laptop computers increases. What are the consequences?
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Quiz_2_Ec182A_Version_1_Answers - STATE UNIVERSITY OF NEW...

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