Overview
SHORT ANSWER AND NUMERICAL QUESTIONS Please answer the following questions clearly and concisely.
1. Columbia and Ecuador grow most of the world's roses. On the average, the quantity of roses sold worldwide is around 6 million bunches a month. And the average price that consumers pay is around $40 a bunch. But one month, February, is not a normal month. Each year in February, the quantity of roses bought increases to four times that of any other month. The reason: valentine's Day. And on Valentine's Day, the price of a bunch of roses doubles. Use demand-supply diagram to explain these facts.
2:You are the manager of a theater. At present the theater charges the same admission price of $8 to all customers, regardless of age. You propose a two-tier pricing scheme: $5 for children under the age of 12 and $10 for adults. You tell your supervisor that your proposal is likely to increase revenues. What must be true about the price elasticity of demand if your proposal is to achieve its goal of raising revenue? Explain your answer.
3:When the Shaffer's have a monthly income of $4,000, they would usually eat out 8 times a month. Now that the couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of demand using the midpoint method. Explain your answer. (Is a restaurant meal a normal or inferior good to the couple?)
4:Suppose that at a price of $55, 100 units were sold, while at a price of $33, 153 units were sold. Without calculating the price elasticity value, can you determine whether demand is elastic, unit-elastic, or inelastic? Explain your answer. TRUE or FALSE Indicate whether you judge the following statements to be True or False.
For only FALSE statements briefly provide brief justifications.
1:An economic model can accurately explain how the economy is organized because it is designed to include every feature of the real world.————
2. If a firm hires a currently unemployed worker, the opportunity cost of utilizing the worker's
services is zero.—————
3. Toward the end of the month when money gets tight, Sara eats a lot of peanut butter Sandwiches. Sara doesn't eat them because she likes them but because they're cheap. If Sara experiences an increase in income, we expect her demand for peanut butter sandwiches will decrease.———-
4. The main determinant of elasticity of supply is the amount of time the producer has to adjust inputs in response to a price change._________
5. Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $3,000._________
6. Efficiency refers to whether a market outcome is fair, while equity refers to whether the maximum amount of output was produced from a given number of inputs.————-
7. Reducing price to increase sales is different from spending a few million dollars on advertising to increase sales at all prices._______
8. Suppose the market for tomatoes is in equilibrium, and events occur that simultaneously shift both demand and supply curves to the right. From this we can certainly determine that the equilibrium price increases.————
9.Economists seldom recommend price controls. But ultimately, whether or not price controls are good policies is a normative question.————
10.Prices are the signals that guide the allocation of resources in a market economy.