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## davenport econ625 Problem Set 2

â¢ Question
1
2 out of 2 points

The
following situation will be used to answer questions 1 through 5. (Adapted from chapter 3 problem 4)
Monthly demand and supply for a computer support service
catering to small businesses can be represented by these equations:
Qd = 3000 – 10P
Qs = -1000 + 10 P
where Qd is the number of businesses demanding the services,
Qs is the number of businesses that suppliers are willing to service, and P is
the monthly fee, in dollars.
At what average monthly fee would demand equal zero?

â¢ Question
2
2 out of 2 points

Refer
to the situation in question 1.
At what average monthly fee would supply equal zero?

â¢ Question
3
2 out of 2 points

Refer
to the situation described in equation 1. What is the equilibrium price?

â¢ Question
4
2 out of 2 points

Refer
to the situation in question 1. What is the equilibrium output level?

â¢ Question
5
2 out of 2 points

Refer
to the situation in question 1.
Suppose demand increases and leads to a new demand curve:
Qd = 3500 – 10P
What will be the new equilibrium price and quantity?
.

â¢ Question
6
2 out of 2 points

The
following situation applies to questions 6 through 9. (Adapted from chapter 3
problem 6)
Joy’s Frozen Yogurt shops have enjoyed rapid growth in
northeastern states in recent years. From the analysis of Joy’s various
outlets, it was found that the demand curve follows this pattern:
Q = 200 – 300P + 120I + 65T – 250Ac + 400 Aj
where Q = number of cups served per week, P = average price
paid for each cup, I = per capita income in the given market (thousands), T =
average outdoor temperature, Ac = competition’s monthly advertising
expenditures (thousands) and Aj = Joy’s own monthly advertising expenditures
(thousands)
One of the outlets has the following conditions: P=1.50,
I=10, T=60, Ac=15, Aj=10.
Estimate the number of cups served per week by this outlet.

â¢ Question
7
0 out of 2 points

Refer
to the previous question. Which of the following represents the demand curve
for this market?

â¢ Question
8
2 out of 2 points

Refer
to question 6. What will be the effect of a \$5 thousand increase in the

â¢ Question
9
2 out of 2 points

Refer
to question 6 and question 8. What would Joy’s expenditure need to be to
counteract the effect of the competitor’s increase in advertising that was
described in question 8?

â¢ Question
10
2 out of 2 points

The
Teenager Company makes and sells skateboards at an average price of \$70 each.
During the past year, they sold 4,000 of these skateboards. The company
believes that the price elasticity for this product is about -2.5. Which of the
following would be the best option for the company? (Based on Chapter 4 question 6)

â¢ Question
11
2 out of 2 points

Refer
to the situation described in question 10. What was total revenue for the past
year, in dollars? (Enter as a whole number without the dollar sign.)

â¢ Question
12
0 out of 2 points

Refer
to the situation described in question 10. Given the price elasticity of -2.5,
and the proposed price of \$63, what should be the quantity supplied? (Round to
the nearest whole number.)

â¢ Question
13
1 out of 2 points

Refer
to the situation described in question 10.
What would total annual revenue be at the proposed price of \$63? (Enter
as a whole number without the dollar sign.)

â¢ Question
14
2 out of 2 points

If the
companyâs belief is correct, would total revenue increase, decrease, or remain
the same as a result of the price cut to \$63?

â¢ Question
15
2 out of 2 points

Questions
15 through 17 refer to the following scenario. A local supermarket lowers the
price of its vanilla ice cream from \$3.50 per half gallon to \$3. Vanilla ice
cream unit sales increase by 20 percent. The store manager notices that the
unit sales of chocolate syrup increase by 10 percent.
What is the price elasticity of vanilla ice cream? Round to
the nearest tenth and drop the minus sign when submitting your answer.

â¢ Question
16
2 out of 2 points

How
would you measure the effect of the ice cream price on chocolate syrup sales?

â¢ Question
17
0 out of 2 points

Refer
to question 15. Overall, do you think that the new pricing policy was
beneficial for the supermarket?

â¢ Question
18
2 out of 2 points

Questions
18 through 21 refer to the following: The demand curve for a product is given
as Q = 2000 â 20P. How many units will be sold at \$10?

â¢ Question
19
2 out of 2 points

At what
price would 1500 units be sold? (Enter as a whole number without the dollar
sign.)

â¢ Question
20
0 out of 2 points

What
will be the total revenue at a price of \$70? (Enter as a whole number without
the dollar sign.)

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