252HomeworkIII_KEY

252HomeworkIII_KEY - Homework III ANSWER KEY Principles of...

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1 Homework III – ANSWER KEY Principles of Microeconomics 252 Sections 03, 04 Fall Semester – 2009 Michael Walrath Due 10/29/09 Note: Homework must be turned in at the end of lecture on Thursday, 10/29/09 (see syllabus for late homework policy). Your homework must be in chronological order. Answer questions in order and please put all tables and graphs in the same area as your answer . Label all graphs for full credit. Show all work. Be sure to staple all pages together. You MUST write your section number on the top right of the first page of your homework. *********************Answers are in ITALICS. ******************** Question 1 (30 Points) John likes sushi. Here is the value he places on sushi: Value of first piece $12 Value of second piece $10 Value of third piece $8 Value of fourth piece $6 Value of fifth piece $4 Value of sixth piece $2 Value of seventh piece $0 (a) From this information derive John’s demand schedule. (A table that gives quantity demanded for a given range of prices, see page 140 for an example.) (b) Graph John’s demand curve for sushi (use a “step” diagram, as seen in class when discussing the Pit Market game and in chapter 7 of your text). (c) If the price of sushi is $7 per piece, how many pieces does John purchase? (d) How much consumer surplus does John get from his purchases (price $7)? (e) Show John’s consumer surplus on your diagram in part (b) (price $7). (f) If the price falls to $5, what is John’s new quantity demanded? How does John’s consumer surplus change (give a specific number (value) for the change in consumer surplus)? Show these changes on the diagram from (b) and (e). Kate can make sushi. Since making sushi is tiring, the cost of producing sushi rises as she makes more. Here is the cost she incurs to produce each piece: Cost of first piece $2 Cost of second piece $4 Cost of third piece $6 Cost of fourth piece $8 Cost of fifth piece $10 Cost of sixth piece $12
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2 (g) From this information, derive Kate’s supply schedule. (A table that gives quantity supplied for a given range of prices, see page 144 for an example.) (h) Graph Kate’s supply curve for sushi (use a “step” diagram). (i) If the price of sushi is $7 per piece, how many pieces does Kate produce? (j) How much producer surplus does Kate get from these sales (price $7)? (k) Show Kate’s producer surplus on your diagram in part (h) (price $7). (l) If the price rises to $9 per piece, what is Kate’s new quantity supplied? How does Kate’s producer surplus change (give specific number (value) for the change in producer surplus)? Show these changes on the diagram from (h) and (k). Consider a market in which John is the buyer of sushi and Kate is the seller of sushi. (m) Draw a market diagram with John’s Demand curve and Kate’s Supply curve. (n) Use Kate’s supply schedule and John’s demand schedule to find the quantity supplied and quantity demanded at prices of $5, $7, $9. Which of these prices brings the market to equilibrium?
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252HomeworkIII_KEY - Homework III ANSWER KEY Principles of...

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