Home Work -1

Problems on Elasticity Problem 1: Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic? What is Julie's elasticity of demand? Problem-2 If Neil's elasticity of demand for hot dogs is constantly 0.9, and he buys 4 hot dogs when the price is $1.50 per hot dog, how many will he buy when the price is $1.00 per hot dog? Problem 3: Katherine advertises to sell cookies for $4 a dozen. She sells 50 dozen, and decides that she can charge more. She raises the price to $6 a dozen and sells 40 dozen. What is the elasticity of demand? Assuming that the elasticity of demand is constant, how many would she sell if the price were $10 a box? Problem 4: Why would a government tax on cigarettes be an ineffective method to decrease consumption of cigarettes? Problem 5: If demand function is given by P= 200-3Q, find the elasticity of demand when price falls from 136 to 119 Problem 6. If demand function is given as P= 50-2Q find elasticity when price is Rs.30? Problem 7 When cheeseburgers are $1.80, consumers purchase 400 chicken filet sandwiches. When cheeseburgers are $1.50, consumers purchase 300 chicken filet sandwiches. What type is good is this? Problem 8: When your income is $1500 per month you buy 12 frozen pizzas per month. When you income rises to $2200 per month you buy 6 frozen pizzas. What type of good is this? Market forces of supply and demand Problem 9: The demand schedule is given as Qd = 380-20P and the supply schedule is given as Qs= -120 +30P, calculate the equilibrium price and quantity? Problem-10: If the government places a $500 tax on luxury cars, will the price paid by consumers rise by more than $500, less than $500, or exactly $500? Explain

Problem-11. A firm's average total cost is $80/unit, its average variable cost is $75/unit, and its output is 50 units. Its total fixed costs are A. less than $10. B. between $10 and $100. C. between $100 and $200. D. between $200 and $300. E. more than $300.

Problem-12: If price elasticity of supply for a product is + 3, what percentage rise in price is needed to bring about a 6% expansion in quantity supplied?

Problem-13: If Boeing produces 9 jets per month, its long run total cost is $9.0 million per month. If it produces 10 jets per month, its long run total cost is $9.5 million per month. Pick the correct answer from below: a. Boeing exhibits constant return to scale. b. Boeing exhibits economies of scale. c. Boeing exhibits diseconomies of scale. d. need more information to answer.