Intermediate Microeconomics: A Modern Approach, Seventh Edition

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ECONOMICS 300 EXAM 2 SPRING 2004 PLEDGE:____________________________ NAME:______________________________ Use this information to answer questions 1-4. Suppose that the supply curve for news stories concerning Michael Jackson is perfectly elastic at the price of $10. The demand curve is downward sloping and can be represented with the equation: Q D = 1000 – 10P. 1. (3) The equilibrium price and quantity of Michael Jackson stories is: a. P = $10, Q = 900. b. P = $10, Q = 100. c. P = $50, Q = 500. d. P = $90, Q = 100. 2. (3) Suppose the government decides to tax stories about Michael Jackson by $5. If this is the case, the price that consumers pay is ____ and the price that suppliers receive is ____. 3. (3) The deadweight loss from the government tax is: 4. (3) We notice that both the price and equilibrium quantity of Michael Jackson stories rises. These increases suggest that:
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2 5. (16) Mel makes movies using two inputs, labor (L) and buckets of blood (B). Mel’s
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