microeconomics exam 1

11255 .I '5' [E' (D $3.amazonaws.com same land as soybeans, rises signicantly. 3. (22 points) Suppose the graph below represents the market for city bus tickets, an inferior good. P 3.50 3.00 .............. 2.50 2.00 ,,,,,,,, 1 .25 A 300 who 12'00 Q a. What is the market equilibrium price and quantity of city bus tickets? b. Suppose incomes rise in the city, which of the labelled points could be the new equilibrium? Briey explain your answer. c. Suppose that the bus fuel and maintenance costs fall, which of the labelled points could be the new equilibrium? Briey explain your answer. (1. Suppose that the price of bus tickets rises to $3.00 while the market quantity falls to 800. The TV news states that, since people are buying 200 fewer bus tickets, this shows that bus travel is not as popular as it once was. Do you agree with this statement? Briey explain your answer. e. The city dramatically reduces the number parking spaces in the city, making it difcult to travel by car. Which of the labelled points could be the new equilibrium? Briey explain your answer. f. A recession decreases incomes of local residents. Which of the labelled points could be the new equilibrium? Briey explain your answer. 4. (22 points)Refer back to the graph for city bus tickets in question three to answer the following questions. a. At the original equilibrium price of $2.50, what is consumer surplus? b. At the original equilibrium price of $2.50, what is producer surplus? c. If supply shifts back so that the new equilibrium is at a price of $300, will consumer surplus rise or fall? What is the new consumer surplus? d. If demand shifts back so that the new equilibrium is at a price of $2.00, will producer surplus rise or fall? What is the new producer surplus? e. Suppose that, if bus tickets were free, a typical person in this city would consume 75 of them. Using that information and the graph above, what is the maximum price the city could charge for an annual bus pass