G S A AUT Section 1: Supply and Demand (40 marks) 1. John and Mary can grow the following units of produce in a period of time: Peppers Tomatoes John 40 160 Mary 60 120 a. Calculate the opportunity cost for each producer and each good. b. Who has comparative advantage in producing each good? 2. Antony faces decreasing marginal benefit from consuming slices of pizza: B'(x) = If pizza costs $3 a slice, then how many slices should he consume? 3. Consider the following demand and supply schedules and specify the inverse demand and supply functions: Price Quantity Demanded Quantity Supplied $4 12 12 $8 10 28 4. Consider the following demand and supply functions and solve for equilibrium price and quantity: D(P) = 400 - 0.5P S(P) = 160 + 0.25P 5. Consider the following inverse demand and supply functions: (Q) = 260 -20 S(Q) = 140 + Q a. Solve for equilibrium price and quantity. b. Illustrate this market making sure to include all intercepts. c. Assume that the government now applies a per unit tax of $12, t = 12, to the supply side of this market. Specify the new supply function (St) and calculate the new equilibrium price and quantity. Add this to your diagram in b. d. Calculate the economic incidence of this tax. 6. Consider the following demand function: QD = 50 - 2P. a. Calculate the price elasticity of demand where price is P = 10. b. Interpret your answer. c. Derive the revenue function, R(Q), associated with this demand function. 7. The demand for coffee is given by the function: Q = 8.5 - p - 0.3ps + 0.1Y, where p is the price of coffee, ps is the price of sugar, and Y is consumer income