Practice Questions for Chapter 2

1. Every day at the local fish market, there are 50 demanders who
are
willing to pay up to $45 for a fish, 35 demanders who are willing to
pay up to
$25 for a fish, and 10 demanders who are willing to pay up to $20 for a
fish.
No demander wants more than one fish. There are 20 fishermen who sell
fish in
this market. Every day the fishermen arrive with the day's catch. Each
fisherman has spent $10 on fuel for his boat the night before, but they
have no
other costs. Fish that are not sold on the same day they are caught
will rot
and become worthless. Every day the fish market reaches a competitive
equilibrium price for the day's fish. On Monday each fisherman caught 2
fish,
on Tuesday each fisherman caught 3 fish, on Wednesday each fisherman
caught 4
fish, and on Thursday each fisherman caught 5 fish. On which day did
the
fishermen make the greatest profit?

(a) Monday

(b) Tuesday

(c) Wednesday

(d) Thursday

2. It is late August. The nation's corn crop is ripe in the fields, but none of it is harvested. It is known that if it is all harvested, the total amount of corn harvested will be 20 million tons. The cost of harvesting the corn and bringing it to market (rather than leaving it in the fields and plowing it down) is $20 per ton. Farmers have spent $30 per ton on preparing, fertilizing, and cultivating the corn fields. On a graph where quantity is on the horizontal axis (measured in millions of tons) and the price is on the vertical axis (measured in dollars per ton), the supply curve in late August for this year's corn delivered at harvest time consists of

(a) a line running from (0,0) to (0,20),
a line
from (0,20) to (20,20), and a line running vertically straight up from
(20,20).

(b) a line running from (0,0) to (20, 0)
and a line
running vertically straight up from (20,0).

(c) a line running from (0,0) to (0,50), a
line from
(0,50) to (20,50), and a line running vertically straight up from
(20,50).

(d) a horizontal line at the height of 20.

3. A drought in the southwest reduced the supply of watermelons
produced in

(a) the price elasticity of supply for
watermelon
is between 0 and +1.0.

(b) the price elasticity of demand for
watermelon is
between -1.0 and 0.

(c) the price elasticity of supply for
watermelon is
greater than +1.0.

(d) the price elasticity of demand for
watermelon is
less than -1.0.

Answers

1 c

2 a

3 b