Question

1)

Suppose the demand and supply curves for eggs in the United
States are given by the following equations:

Qd = 100 - 20P
Q_s = 10 + 40P

where Qd = millions of dozens of eggs Americans would like to

buy each year; Qs = millions of dozens of eggs U.S. farms
would like to sell each year; and P = price per dozen of eggs.

Fill in the following table:

Price Quantity Quantity

( Per Dozen) Demanded (Qd) Supplied (Qs)

$ .50

$ 1.00

$ 1.50

$ 2.00

$ 2.50

2) Kamika lives in Chicago but goes to school in Tucson, Arizona.

For the last 2 years, she has made four trips home each year.
During 2010, the price of a round-trip ticket from Chicago to
Tucson increased from $350 to $600. As a result, Kamika
decided not to buy a new outfit that year and decided not to

, drive to Phoenix with friends for an expensive rock concert.

a. Explain how Kamika's demand for clothing and concert tickets can be affected by an increase in air travel prices.

b. By using this example, explain why both income and substitution effects might be expected to reduce Kamika s number
of trips home.

3) For each of the following products, explain whether demand is likely to be elastic or inelastic.

A) Cigarettes

B) Tacos

C) Gasoline

D) Milk

4 ) Explain which of the following is a fixed cost or a variable cost
for Southwest Airlines.

a. The cost of jet fuel used in its airplanes.

b. The monthly rent on its Dallas, Texas headquarters.

c. The yearly lease payments on its current inventory of
Boeing 737 jets.

d. The cost of peanuts it serves to passengers.

5) Which of the following indistries do you think are likely to exhibit large economies of scale? explain why in each case

a) Home building

b) Electric pwer generator

c) Vegetable farming

d) Software development

e) Aircraft manufacturing