Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 7, Problem 10P
To determine
The effect of a decrease in
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Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 250 million cans per year. Suppose that the
Centers for Disease Control (CDC) announces that a chemical found in tuna helps prevent many viral infections from spreading.
The CDC's announcement will cause consumers to demand
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10
Supply
Demand
8
7
Supply
3
Demand
2
1
50
100
150
200
250
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350
400
450 500
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In the long run, some firms will respond by
until
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Imagine a new company enters a market selling tutoring. The firm does some experimentation in the market, and it reports the following data points. At $75 per student, 2,250 students sign up for tutoring. At $30 per student, 9,000 students sign up. At $150 per student, no students sign up.
1.Write the equation representing this demand curve.
2. Relax the assumption that demand is linear; instead, assume only that the law of demand holds. Given this assumption and the data you observe, what can we say about the number of students who sign up at prices greater than $75?
The school’s accountants determine that when the price per student is $15 it can supply 1,500 spots for tutoring, and that when the price is $45, it can supply 7,500.
3.Relax the assumption that supply is linear; instead, assume only that the law of supply holds. Given this assumption and the data you observe, what can we say about the number of student slots the school supplies at prices greater than $400?
4.Find the…
Suppose the market for quiche is perfectly competitive, so sellers take the market price as given. Hilary manages a restaurant that offers quiche for
sale. The following graph plots Hilary's weekly supply curve (orange line). Point A represents a point along her supply curve. The price of quiche is
$2.25 per slice, which is given by the black horizontal line.
PRICE (Dollars per slice)
9.00
8.25
7.50
6.75
6.00
5.25
4.50
3.75
3.00
2.25
1.50
0.75
0
0
Price
Supply
2 4
Hilary's Weekly Supply
A
6 8 10 12 14 16
QUANTITY (Slices of quiche)
18
+
20 22 24
Using the previous graph, you can determine that Hilary is willing to supply her 6th weekly slice of quiche for $
per slice, the producer surplus earned from supplying the 6th slice of quiche is $
Suppose the price of quiche were to rise to $3.00 per slice. At this higher price, Hilary would receive a producer surplus of $
slice of quiche she sells.
Since she receives $2.25
from the 6th
Chapter 7 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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