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**Unformatted text preview: **eberry pie is p=$2.50. Charlotte’s total willingness to pay
for gooseberry pies is indicated below. How much is Charlotte’s consumer surplus equal to if she
consumes an optimal number of pies?
Quantity
Total Willingness to pay
0
0
1
6
2
10
3
13
4
15
5
16
a. 0
b. $0.50
*c. $5.50
d. $10.50
e. $13.00
[Charlotte consumes 3 pies since the MB from the 4th pie is 2 < 2.50. Her surplus is 13-(3x2.50)=5.50]
8. Consider the total cost of producing shirts for the Crazy Jane’s T-Shirt Designs:
Quantity
Total Costs 0
10
1
20
2
32
3
40
4
50
5
65
If the market is competitive and the market price of T-shirts is equal to $14, how many shirts should
Crazy Jane’s produce?
a. 0
b. 1
c. 2
d. 3
*e. 4
[The MC of the 5th shirt is greater than price]
9. Consider the total cost of producing shirts for the Crazy Jane’s T-Shirt Designs:
Quantity
Total Costs
0
10
1
20
2
32
3
40
4
50
5
65
If the market is competitive and the market price of T-shirts is equal to $14, what is the value of
producer surplus when Crazy Jane’s maximises profit?
a. -5
b. 0
*c. 6
d. 16
e. 50
[Revenue from producing 4 shirts is $56]
10. The supply curve for grape juice is give by the following: Qs = 20 + 2p. At a price of $2 the price
elasticity of supply is:
*a. 0.167
b. 0.5
c. 1
d. 2
e. 6
*η = (P/Q)(dQ/dP) = (2/24)(2) = 1/6]
11. Assume that when the price of beef is $10 per kilo, the quantity demanded of pork is 5000. If the
price of beef rises to $11 per kilo and the quantity demanded of pork increases to 6000, then using
the mid-point formula the cross price elasticity of pork with respect to beef is ____...

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