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TA_answers - Answers to TA Practice Problems 1 d 2 d 3 a 4...

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Answers to TA Practice Problems 1. d 2. d 3. a 4. c 5. d 6. b 7. d 8. c 9. a 10. c 11. Answer: A is true by definition of efficient point. There cannot be dead weight loss at efficient point because DWL is defined to be difference of GFT from the maximum GFT. Consumer surplus does not have to be maximized at efficient point. If price and quantity is set to a point where demand curve meets Q axis, the consumer surplus could be maximized but it is certainly not an efficient point, where demand and supply curves meet. 12. Answer: D. Change in demand of a complement good will result in change in price of that good hence affect demand for eraser. So, D is true. If price of pencil increases, demand for erasers will decrease by definition of complement good. The decrease in demand will in turn lower the price of erasers. This explains B and C. 13. Answer: d is true. For a and e, think of an example where both demand and supply curves shift out while new equilibrium price is higher than before. In this case, CS and GFT increase. If we shift the demand and supply curves inwards while making the equilibrium price higher, we can see that PS decreases. Therefore, b is not true.
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