Midterm_L2_sol

Midterm_L2_sol - ECON110-L2IntroductoryMicroeconomics

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ECON110 - L2 Introductory Microeconomics Midterm Examination Solution * The numbers in [] indicates the points of each question, and the numbers in () indicates the module  objectives corresponding to each problem.  1. [25] A market research team has come up with the demand and supply schedules for pizza in  Cheeseboro. These schedules are given in the table below. Use these data to analyze the situation in the  market for pizza.  Price (dollars per pizza) Quantity demanded (per week) Quantity supplied (per week)   5 750    300   6 700    400   7 650    500   8 600    600   9 550    700 10 500    800 11 450    900 12 400 1,000 (1)  [5] Draw a figure showing the demand curve for pizza and the supply curve of pizza. What are  the equilibrium price and quantity? (3.4) (2) [10] Suppose the price is $10. Describe the situation in the market and explain how the price of  pizza adjusts. Now suppose the price is $6. Describe the situation in the market and explain how  the price of pizza adjusts. (3.4) (3) [10] The market research report also includes a prediction about the effect on the market for pizza  in Cheeseboro of a recent news published in Cheeseboro Herald. The Herald reported that pizza  has been discovered to help prevent heart diseases. Unfortunately, your dog chewed up the report  and all you can read about the prediction is "quantity. .. by 150 at each price." What does the  prediction say? Use your graph to show the predicted effects on the market for pizza. What are the  predicted equilibrium price and quantity? How will the market adjust? (3.5)
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This note was uploaded on 05/20/2011 for the course ECON 110 taught by Professor Po during the Spring '11 term at HKU.

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Midterm_L2_sol - ECON110-L2IntroductoryMicroeconomics

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