Part II

1.
Ex1: Suppose the number of buyers in a market increases and a technological advancement occurs
also. What would we expect to happen in the market?

Ex2: What would happen to the equilibrium price and quantity of coffee if the wages of coffee bean
pickers fell and the price of tea fell?

Ex3: Analyze the effects of each event on the equilibrium price and quantity of orange juice when
there is a fall in the price of apple juice and the price of orange declines because of an abundant apple
fall.

Ex4: Suppose the incomes of buyers in a market for a particular normal good decrease and there is
also a reduction in input prices. What would we expect to occur in this market?

Ex5: If macaroni and cheese is an inferior good, what would happen to the equilibrium price and
quantity of macaroni and cheese if consumers’ incomes rise?

Ex6: Suppose a buyer perceives computers and printers as complementary goods. In the event that the
price of computers rises, the buyer’s purchasing behavior and the demand for printers may be
influenced?

Part III

TYPE 1A:

A market has the demand function and the supply function as follows:
Qd = - P + 15
Qs = 2P + 6
a. Determine the equilibrium price and equilibrium quantity
b. If the government imposes a maximum price of $7, does a shortage or surplus (or neither) develop?
What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus? Is it not
binding or a binding price ceiling?
c. If the government imposes a minimum price of $7, does a shortage or surplus (or neither) develop?
What are the price, quantity supplied, quantity demanded, and size of the shortage or surplus? Is it not
binding or a binding price floor?

TYPE 1B:
1. Good A has demand and supply functions as follows:
Ps = 48 + 4Q
Pd = 84 – 2Q
In which P is measured as 1000/kg and Q is measured in ton
Questions:
a. Calculate equilibrium price and quantity
b. If the government imposes a tax of 2000/kg on producers, what is new price and quantity
equilibrium? Calculate tax incidence on buyer and producer

2.Good A has demand and supply functions as follows:

Qd = -4P + 12
Qs = P + 8
Questions:
a. Calculate equilibrium price and quantity. Determine the price elasticity of demand at
equilibrium. To increase turnover should the firm increase or decrease price? Why?
 b. If the government imposes a tax of 0.5/unit to producers, what is the price the buyers
have to pay and the price the producers receive?

TYPE 2
1. Good A has demand and supply functions as follows:
Qd = -2P + 18
Qs = 2P +12
Questions:
a. Calculate equilibrium price and quantity. Determine the price elasticity of demand at
equilibrium. To increase turnover should the firm increase or decrease price? Why?
b. If the government gives a subsidy of 0,2/unit to producers, what is the price the buyers
have to pay and the price the producer received.

2. Good A has demand and supply functions as follows:

Qd = -5P + 20
Qs = P +5
Questions:
a. Calculate equilibrium price and quantity. Determine the price elasticity of demand at
equilibrium. To increase turnover should the firm increase or decrease price? Why?

b. If the government gives a subsidy of 6/unit to producers, what is the price the buyers
have to pay and the price the producer received.

TYPE 3
3. A firm in competitive market has total production cost function as follows:
TC = 4Q2 + 16Q + 300
A. At P = 50, determine Q when the firm maximizes profit. Calculate total profit
B. Determine the firm's break even price and output

4. A firm has total production cost function as follows:

TC = Q2 + Q + 100
s. What is FC, AC, AVC, and MC?
b. If P = 27 what is the quantity of output when the firm maximizes profit? Calculate that
maximum profit.

TYPE 4
5. A firm has demand function and total production cost as follows:
Qd = - P + 35
TC = 2Q2 + 2Q + 10
Questions:
a. When firm maximize profit, calculate P, Q, TR, and maximum profit
b. Suppose firm has to pay a tax of 9/unit, calculate new maximum profit
TC (tax) = 2Q2 + 2Q + 10 + 9Q

6.A firm has demand function and total production function as follows:
Qd= -P/2 +60
TC = Q2 + 6Q + 13
a. To maximize profit, what is P, Q, TR and maximum profit
b. If the government imposes a fixed tax of 120, what is P, Q and maximum profit?
TC (tax) = Q2 + 6Q + 13 + 120

9. A firm is facing with a demand curve: P = 24 – 2Q

 and total cost function: TC=2Q2+15
a. Calculate P1, Q1 and ∏1 when firm maximize profit.
c. Government imposes a 3$/ unit tax on producers. What is the new P3 and Q3 to maximize
profit?

10. Total cost function of a perfectly competitive firm is: TC = Q2 + Q + 225

a. At P = 35$, calculate Q* and PMAX
B. Calculate the break-even point of this firm
c. At P = 5$, does this firm earn profit or get loss? Identify the profit or loss. In case the
firm gets lost, should it shut down or continue to produce? Why?

11. A firm is facing with the demand curve P = 180 - Q and cost function
TC=20 +40Q +Q2 (P:$/unit, Q: units).
a. Calculate P1, Q1 and profit max P1 when this firm wants to maximize profit
and present your answer in question in a graph.
d. The government imposes a $20/unit tax on producers. Calculate new P2, Q2 and profit
max when this firm still wants to maximize profit.

12. You are given the following information about the market for pair of shoes:
P = 40+Q
P = 120-Q
(P: $; Q: pairs)
a. Find the equilibrium price and quantity of shoes in this market.
b. Calculate actual quantity in this market when P=$75
c. Suppose that the government decides to impose an excise tax of $6 per pair of
shoes in this market. What will be the new equilibrium in this market?
13. A firm is facing with the demand curve: P($) = 200-Q
The firm’s cost functions is TC($)=0.5Q2 + 20Q +200
a. Calculate P1, Q1 and Profit MAX ∏1.
b. Government imposes a $15/ unit tax on producers. Calculate new P2, Q2 and ∏2 . when
this firm still wants to maximize profit?

14. A firm in a perfect competition market has a cost function TC=Q2+Q+169.

a. At P=$37, calculate Q* of this firm?
b. Calculate break-even point of this firm.
c. At price P=$10, should this firm close its business? Why?