wk1_pq - The Colorado College Department of Economics and...

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1 The Colorado College Department of Economics and Business Block 7 Econ 207 Practice Question set 1 1. Aspen, Colorado is engaging in a bumper-sticker advertising campaign. Monthly sales data from ski shops selling the “Don’t Worry-Be Happy (in Aspen)” bumper-stickers indicate that: Q=6000-2000P Where, Q is bumper-sticker sales and P is price. (a) How many bumper-stickers could Aspen sell at $2 each? (b) What price would Aspen have to charge to sell 5000 bumper-stickers? (c) At what price would bumper-sticker sales equal zero? (d) How many bumper-stickers could be given away free? (e) Calculate the point price elasticity of demand at a price of $1. 2. The US Department of Agriculture is interested in analyzing the domestic market for corn. The USDA’s staff economists estimate the following equations for the demand and supply curves: Q d =1600-125P Q s = 440+165P (a) Calculate the equilibrium price and quantity that will prevail under a completely free market. (b) Calculate the price elasticities of supply and demand at the equilibrium values. (c) The government now puts a price support program in place at $4.50 per bushel. What impact will this support price have on the market? Will the government be forced to
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wk1_pq - The Colorado College Department of Economics and...

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