# Answer_Key_Exam_1_Version_A - Econ 302 Exam 1 McLeod Name...

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Econ 302 Exam 1 McLeod Name _____________________________ PSU ID# _________________________________ 1. (40 total points) Suppose you are hired by the Martin guitar company as an economic consultant. You estimate the demand for Martin guitars to be Q = 9,000 – 6P. a) (6 points) What price should Martin charge in order to maximize its revenue? P = \$750 b) (6 points) Suppose the supply of Martin Guitars is given by Q = -3000 +9P. What is the equilibrium price and quantity of Martin guitars? P* = \$800; Q* = 4200 c) (6 points)What is the price elasticity of demand at the equilibrium price and quantity? -4800/4200 = -24/21 = -8/7 = -1.143 d) (6 points) What is the price elasticity of supply at the equilibrium price and quantity? 7200/4200 = 72/42 = 36/21 = 12/7 = 1.714

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consumers. e) (6 points) What price will consumers pay after the tax is levied? \$804 f) (6 points) What proportion of the tax will be paid by the suppliers of Martin guitars? 40% or .4
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Answer_Key_Exam_1_Version_A - Econ 302 Exam 1 McLeod Name...

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