{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Test1Answers2005 - ANSWERS TO TERM TEST#1 1(a(b(c 2(a P =...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ANSWERS TO TERM TEST #1 (October 28, 2005): 1. (a) P = 10 Q = 4,000 (b) Q demanded = 8,000 Q supplied = 2,000 There is a shortage of eggs. (c) P=12 on the “black market,” since Q demanded = 2,000 if P=12 2. (a) market price increases, but by less than $5; the price received by sellers falls, but by less than $5; the price paid by buyers is the market price; the quantity bought and sold decreases (see Figure 6.7, page 129 in text) (b) market price increases by $5; the quantity bought and sold is unchanged; tax revenue is $50,000 per month 3. (a) The opportunity cost of producing one car is: 1.67 bushels of wheat in Canada; 0.75 bushels of wheat in Argentina. Argentina has the lower opportunity cost and hence the comparative advantage in the production of cars. Canada would export wheat, if trade occurs. (b) Canada would prefer to produce cars domestically (at an opportunity cost of 1.67 bushels of wheat) rather than trade two bushels of wheat for one car. Argentina would wish to trade since the opportunity cost of producing one car is only 0.75 bushels of wheat.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern