202 S08 PS4 (Practice Exam I Questions)

202 S08 PS4 (Practice Exam I Questions) - Economics 202...

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Economics 202 Problem Set 4 (Practice Exam I Questions) 1. A consumer currently purchases 7 units of a good when the price is $8. The maximum amount a consumer would be willing to pay rather than do without is A. $56. B. the area under the demand curve up to 7 units. C. consumer surplus. D. total cost. E. both A and D. F. both B and C. G. none of the above. 2. A recent news story noted that several of the key ingredients of ice cream have increased in price. Suppose in addition that weather forecasters predict that the weather will be cooler than normal which will make ice cream less attractive as a dessert option. You’ve been hired by Ice Cream Council of America to predict what effects these changes will have on the equilibrium price and quantity of ice cream. Indicate the result of your analysis by circling one of the choices below. A. equilibrium price falls, equilibrium quantity falls. B. equilibrium price falls, equilibrium quantity rises. C. equilibrium price falls, the change in equilibrium quantity is ambiguous. D. equilibrium quantity falls, equilibrium price rises. E. equilibrium quantity rises, equilibrium price rises. F. equilibrium quantity falls, the change in equilibrium price is ambiguous. 3. Fill-in-the-blank: The demand function for cheese curds is known to be Q d = 45 – 3P and the supply function is Q s = -5 + 2P. A tax of T = $5 is placed on the good. What is the economic incidence of this tax (calculated as a proportion) on consumers? That is t c = _____. The total tax revenue generated by this tax is $_____. 4. People enjoy consumer surplus because 5. When the price of a commodity rises, we can expect 6. Boyd buys 4 extra hot dogs per week every time the price falls by $.50. He is now eating 10 hot dogs per week and, at the current price, his point elasticity of demand is equal to 1.4. Hot dogs now cost between
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