Section 1: Supply and Demand (40 marks) 1. James and Lisa can grow the following units of produce in a period of time: Peppers Tomatoes James 8 9 Lisa a. Explain who has absolute advantage in producing each good. b. Calculate the opportunity cost for each producer and each good. c. Explain who has comparative advantage in producing each good. 2. Consider the following demand and supply schedules and specify the inverse demand and supply functions: Price Quantity Demanded Quantity Supplied 3. Consider the following demand and supply functions and solve for equilibrium price and quantity: D(P) = 40 - 0.25P S (P ) =-5+0.5P 4. Consider the following inverse demand and supply functions: D(Q) = 250 - 2Q S(Q) = 112 + 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 $18, t = 18, to the supply side of this market. Specify the new supply function (S,) and calculate the new equilibrium price and quantity. Add this to your diagram in d. Calculate the economic incidence of this tax. 5. Consider the following demand function: QD = 160 - 4P. a. Calculate the price elasticity of demand where price is P = 15. b. Interpret your answer. c. Transpose the demand function into an inverse demand function. d. Derive the revenue function, R(Q), associated with the inverse demand function