1) The market for backyard grills consists of four individuals: Abe, Betsy, Chloe, and Daniel. Abe considers himself a grill-master, and a backyard grill is an absolute necessity. Abe willing to pay $400 for a grill. Betsy is a meat-lover who is honing her grilling skills. Betsy is willing to pay $350 for a grill. Chloe loves a good grilled steak and is willing to pay $320 for a grill. Daniel enjoys grilled shrimp and believes that grilling his own shrimp is cheaper than eating out. Daniel is willing to pay $200 for a backyard grill. If the market price of grills increases from $310 to $350 then:

• total consumer surplus would fall by $120.

• Abe, Betsy, Chloe, and Daniel will each experience an increase in consumer surplus.

• Chloe and Betsy will experience a decrease in consumer surplus, but Abe's consumer surplus will increase.

• total consumer surplus would fall by $90.

• Chloe will experience a decrease in consumer surplus, but Abe and Betsy will experience an increase in consumer surplus.

2)

Consider the market for motorized golf carts. Suppose that there and an increase in the price of oil, which makes it more expensive to manufacture golf carts, and makes it more expensive for owners to operate golf carts.

• The equilibrium price will increase, but the effect on equilibrium quantity is indeterminate.

• The equilibrium quantity will increase, but the effect on the equilibrium price is indeterminate.

• The equilibrium quantity will decrease, but the effect on the equilibrium price is indeterminate.

• The equilibrium price will decrease, but the effect on equilibrium quantity is indeterminate.

• Both the equilibrium price and equilibrium quantity will decrease.

3)

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering both country's production possibilities frontiers, we can conclude that Country B will specialize in:

• trucks, and be willing to accept no more than 3 cars for each truck.

• trucks, and be willing to accept no fewer than 3 cars for each truck.

• cars, and be willing to give no fewer than 3 cars for each truck.

• cars, and be willing to give no more than 3 cars for each truck.

• None of the options.

4) A method for allocating scarce goods arising from the imposition of an effective price ceiling is:

• to offer scarce goods on a first-come, first-served basis.

• to use ration coupons that allocate a predetermined quantity to each household.

• to distribute scarce goods to friends and family of the producers.

• a black market.

• All of these methods are used to allocate scarce goods.

Transcribed Image Text:

Cars 30 25 20 15 10 5 1 2 3 4 5 Country A Cars 6 7 Trucks 12 9 6 3 1 2 3 4 Country B Trucks Cars 30 25 20 15 10 5 1 2 3 4 5 Country A Cars 6 7 Trucks 12 9 6 3 1 2 3 4 Country B Trucks

Answer rating: 100% (QA)

1 Consumer surplus when the price is 310 Consumer surplus Consumer willingness to pay Market price a... View the full answer