quanda04 - Chapter 4 1. Suppose we have the following...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 4 1. Suppose we have the following market supply and demand schedules for bicycles: a. Plot the supply curve and the demand curve for bicycles in Exhibit 1. Exhibit 1 Answer: See Exhibit 3. Exhibit 3
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Practice Questions to accompany Mankiw & Taylor: Economics 2 b. What is the equilibrium price of bicycles? Answer: €300 c. What is the equilibrium quantity of bicycles? Answer: 50 bicycles d. If the price of bicycles were €100, is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall? Answer: Shortage, 70 – 30 = 40 units, the price will rise e. If the price of bicycles were €400, is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall? Answer: Surplus, 60 – 40 = 20 units, the price will fall f. Suppose that the bicycle maker's labour union bargains for an increase in its wages. Further, suppose this event raises the cost of production,
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quanda04 - Chapter 4 1. Suppose we have the following...

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