MODERNPRINCIPLES:MACROECONOMICSMODERNPRINCIPLESOFECONOMICS44Equilibrium: How Supply and DemandDetermine PricesFacts and Tools1.If the price in a market is above the equilibrium price, does this create a surplus ora shortage?1.A surplus: a lot of unsold goods.Solution
3.Jon is on eBay, bidding for a first edition of the influential Frank Miller graphicnovelBatman: The Dark Knight Returns.In this market, who is Jon competing with:the seller of the graphic novel or the other bidders?Solution
4.Now, Jon is in Japan, trying to get a job as a full-time translator; he wants to trans-late English TV shows into Japanese and vice versa. He notices that the wage fortranslators is very low. Who is the “competition” pushing the wage down: Doesthe competition come from businesses who hire the translators or from the othertranslators?Solution
S-15.Jules wants to purchase a Royale with cheese from Vincent.Vincent is willing tooffer this tasty burger for $3. The most Jules is willing to pay for the tasty burger is$8 (after all, his girlfriend is a vegetarian, so he doesn’t get many opportunities fortasty burgers).a.How large are the potential gains from trade if Jules and Vincent agree to makethis trade? In other words, what is the sum of producer and consumer surplus ifthe trade happens?b.If the trade takes place at $4, how much producer surplus goes to Vincent?How much consumer surplus goes to Jules?c.If the trade takes place at $7, how much producer surplus goes to Vincent?How much consumer surplus goes to Jules?S-1Cowen3e_CH04_Solutions.indd129/06/1512:49 PM
