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ECON 201 PRINCIPLES OF MICROECONOMICS EXAM Q & A WITH RATIONALES 2024
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ECON 201 PRINCIPLES OF MICROECONOMICS EXAM Q & A WITH RATIONALES 2024
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ECON 201Principles of
Microeconomics
Q & A w/ Rationales
204
,A:
1. Suppose that the demand for pizza in a college town is
given by Qd = 1200 - 50P, where Qd is the quantity
demanded per week and P is the price per pizza. The
supply of pizza is given by Qs = 300 + 25P, where Qs is
the quantity supplied per week. What is the equilibrium
price and quantity of pizza in this market?
a) P = $12, Q = 600 pizzas
b) P = $10, Q = 550 pizzas
c) P = $8, Q = 500 pizzas*
d) P = $6, Q = 450 pizzas
Rationale: The equilibrium price and quantity are
determined by setting Qd = Qs and solving for P and Q.
This gives P = $8 and Q = 500 pizzas.
2. Suppose that the government imposes a tax of $2 per
pizza on the sellers of pizza in the previous question. What
is the new equilibrium price and quantity of pizza in this
market?
a) P = $10, Q = 450 pizzas*
b) P = $9, Q = 475 pizzas
c) P = $8, Q = 500 pizzas
d) P = $7, Q = 525 pizzas
Rationale: The tax shifts the supply curve up by $2, so the
new supply equation is Qs = 300 + 25(P - 2). Setting Qd =
Qs and solving for P and Q gives P = $10 and Q = 450
pizzas.
, 3. What is the incidence of the tax on the buyers and sellers
of pizza in the previous question?
a) Buyers pay $1 more per pizza and sellers receive $1 less
per pizza*
b) Buyers pay $2 more per pizza and sellers receive the
same amount per pizza
c) Buyers pay the same amount per pizza and sellers
receive $2 less per pizza
d) Buyers pay $1.50 more per pizza and sellers receive
$0.50 less per pizza
Rationale: The incidence of the tax is determined by
comparing the change in price paid by buyers and received
by sellers before and after the tax. Before the tax, buyers
paid $8 per pizza and sellers received $8 per pizza. After
the tax, buyers paid $10 per pizza and sellers received $8 -
$2 = $6 per pizza. Therefore, buyers pay $1 more per pizza
and sellers receive $1 less per pizza.
4. Suppose that a new technology allows pizza makers to
produce pizzas faster and cheaper. How does this affect the
demand and supply curves for pizza in the previous
questions?
a) The demand curve shifts right and the supply curve
shifts left
b) The demand curve shifts left and the supply curve shifts
right
c) The demand curve does not change and the supply curve
shifts right*
d) The demand curve does not change and the supply curve
shifts left
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