week03 - ECON 2 1H 1I Midterm 1 Review Liao Pei-Ju Essay...

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ECON 2 1H 1I Midterm 1 Review FALL 2007 Liao, Pei-Ju Week03 : Oct.15/Oct.16 1 z Essay Questions 1. (M1W06) Suppose the market for pizzas is characterized by the following two equations: Q=20P-100 and P=15-0.05Q. a) Which is the Demand (or Inverse Demand) and which is the Supply (or Inverse Supply)? Why? b) If the price of a pizza is set at $5, what are the quantities demanded and supplied? At that price, is there excess supply or excess demand? Show it graphically. c) Suppose the market for pizza is competitive. In equilibrium, how many pizzas would be sold and at what price? 2. (M1F06) After a plane crash, Tom Hankie becomes a lone castaway on a small island of the Pacific Ocean. A) He works 6 hours a day, collecting coconuts and catching fish (the rest of the time he plays ping pong by himself). It takes him an hour to catch a fish, while he can pick a coconut in 30 minutes. Draw Tom’s PPF for each day. What is the slope of Tom’s PPF? Why is it negatively sloped? B) After several years, Tom saw a boat drift to the beach of this island. There was a monkey in the boat. The monkey can collect 24 coconuts or catch 12 fishes per day. The monkey also works 6
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