Exam 3: Using Supply and Demand to Analyze Markets

Use the following to answer question: Figure 3.5 -(Figure 3.5) After September 11, the demand curve for air travel shifted inward, from D₂₀₀₀ to D₂₀₀₁. In 2000 the equilibrium price and quantity were $122.22 and 148.9 million enplanements, respectively. After September 11, the equilibrium price and quantity fell to $104.82 and 123.6 million enplanements, respectively. The loss in producer surplus attributable to the decrease in demand is equal to area:

Integral calculus can be used to determine:

Use the following to answer question: Figure 3.17 -(Figure 3.17) Figure 3.17 shows the effect of a government subsidy. Which of the following statements is (are) TRUE?

Use the following to answer question: Figure 3.19 -(Figure 3.19) Refer to Figure 3.19 to answer the following question:

The demand and supply of ethanol are given by Q^D = 8,000 - 2,000P and Q^S = 1,000P - 1,000, where P is price per gallon and Q measures gallons per minute. What does it cost the government to subsidize ethanol at $0.30 a gallon?

Use the following to answer questions 11-12: Figure 3.4 -(Figure 3.4) The outward shift of the supply curve will cause producer surplus to increase from area _____ to area _____.

All else equal, a demand increase:

Use the following to answer questions 29-31: Figure 3.10 -(Figure 3.10) At a price floor of $750, there is an excess supply of _____ tons of peanuts.

Deadweight loss can be calculated as:

To calculate consumer surplus:

Suppose that the demand curve for brown rice is given by , and supply is . a. Find the equilibrium price and quantity. b. Calculate the consumer surplus at the equilibrium price. c. Calculate the producer surplus at the equilibrium price.

Suppose that the market demand curve for residential water is: Q^D = 10 - 2.25P and the market supply curve is: Q^S = -10 + 2.75P where the quantity is measured in millions of gallons per month and the price is in dollars per thousand gallons. a. Calculate the equilibrium price and quantity. b. Calculate the consumer surplus at the equilibrium price.

The supply and demand for squash are given by Q^D = 200,000 - 50,000P and Q^S = 90,000P - 80,000, where P is price per pound and Q measures pounds of squash.

The market for plywood is characterized by the following demand and supply equations: Q^D = 800 - 10P and Q^S = 50P - 1,000, where P is the price per sheet of plywood and Q measures the quantity of plywood. What is the size of the deadweight loss if the government imposes a price ceiling of $25 per sheet of plywood?

All else equal, a negative supply shock:

Producer surplus can be calculated as:

Suppose that last year the equilibrium price and the quantity of good X were $10 and 5 million pounds, respectively. Because of strong demand this year, the equilibrium price and the quantity of good X are $12 and 7 million pounds, respectively. Assuming that the supply curve of good X is linear, producer surplus:

Use the following to answer questions 29-31: Figure 3.10 -(Figure 3.10) If the government mandates a price floor of $750, the area of producer surplus changes from:

Use the following to answer questions 22-23: Figure 3.8 -(Figure 3.8) At a price ceiling of $2, what is the amount of surplus transferred from producers to consumers?

If the government subsidizes a product, what is the relationship between the price that buyers pay (P_B) and the price that sellers receive (P_S)?