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Take Home Midterm Examination The Marketing Environment Spring, 2010 Mr. Volpe Please answer all ten essay questions. Each question is worth 10

Using the schedules given, plot the demand curve and the supply curve on the below graph.
Label the axes and indicate for each axis the units being used to measure price and quantity.
Then answer the questions.

Quantity demanded Quantity supplied
Price (bushels of oats) Price (bushels of oats)
$1.50 10,000 $1.50 40,000
1.40 15,000 1.40 35,000
1.30 20,000 1.30 30,000
1.20 25,000 1.20 25,000
1.10 30,000 1.10 20,000
1.00 35,000 1.00 15,000

(a) Give the equilibrium price and quantity for oats.

(b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply and demand curves to the price and quantity axes.

(c) If the Federal government decided to support the price of oats at $1.40 per bushel, tell whether there would be a surplus or shortage and how much it would be.

(d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the shortage or surplus.
Take Home Midterm Examination The Marketing Environment Spring, 2010 Mr. Volpe Please answer all ten essay questions. Each question is worth 10 points. These are essentially short answer questions that should not take more than a few paragraphs to complete. The exam must be submitted electronically to my e-mail account ( [email protected] ) or via Blackboard no later than May 2, 2010, at 9:00 pm. Question 1 How does consumer choice differ from consumer sovereignty in a market system? Consumers face trade-offs in their purchase decisions, since their income is limited and choices are numerous. In order to make choices, consumers must combine budget constraints (what they can afford), and preferences (what they would like to consume). By "consumer sovereignty" it’s meant that, in a free market, the consumers ultimately dictate what is to be produced. While the capitalists and entrepreneurs might steer the economy, they ultimately take orders from the consumers by responding to demand for certain goods and lack of demand for others. Question 2 Can ticket “scalping” be justified? Explain (either way -- hopefully the correct way) using microeconomic analysis. Question 3 Using the schedules given, plot the demand curve and the supply curve on the below graph. Label the axes and indicate for each axis the units being used to measure price and quantity. Then answer the questions. Quantity demanded Quantity supplied Price (bushels of oats) Price (bushels of oats) $1.50 10,000 $1.50 40,000 1.40 15,000 1.40 35,000 1.30 20,000 1.30 30,000 1.20 25,000 1.20 25,000 1.10 30,000 1.10 20,000 1.00 35,000 1.00 15,000 (a) Give the equilibrium price and quantity for oats.
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(b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply and demand curves to the price and quantity axes. (c) If the Federal government decided to support the price of oats at $1.40 per bushel, tell whether there would be a surplus or shortage and how much it would be. (d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the shortage or surplus. Question 4 Given the following statement: “Due to lower grain prices, consumers can expect retail prices of choice beef to begin dropping slightly this spring, with pork becoming cheaper after midsummer.” This reflects increasing supply.” Does the statement use the term supply correctly? Suppose the U.S. Department of Agriculture made this announcement. What effects might this statement have on consumer demand? Explain. The term supply is used correctly because the price is a direct result of the grain prices. So in theory pork and beef each adjust their prices for the amount of supply that is being forecasted. Consumer demand at present might decrease as consumers wait to make big purchases of beef and pork in the future when prices are predicted to drop. By spring, if beef prices drop, there should be an increase in the quantity of beef demanded and probably a decrease in the demand for pork, which is a substitute for beef. If the pork prices fall as expected during mid-summer we can expect an increase in the quantity of pork being demanded. If beef prices fall, it would be difficult to determine if there would be much of a change in the demand because of the price of pork. Question 5 Suppose a producer sells 1,000 units of a product at $5 per unit one year, 2,000 units at $8 the next year, and 3,000 units at $10 the third year. Is this evidence that the law of demand is violated? Explain. No, the law of demand is not violated in this scenario. This scenario does not give any information about the demand for the unit, only the price per unit. The law of demand is an inverse relationship between the price and the quantity. In its simplest form is that as the price increases, the demand demises. Question 6 What are the conditions for equilibrium in indifference curve analysis? An equilibrium is a position of rest, determined in each model by the relevant behavioral assumptions. Question 7
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