Supply and Demand and Price Elasticity
1.
Sally spends her afternoon at the art gallery, paying $5 for her bus fares and $11 for food and drinks rather than spending an equal amount of money to go to a movie and have a similar meal at a similar price. The opportunity cost of going to the art gallery
a.
b.
c.
d.
e.
is less than the opportunity cost of going to the movies. equals $5 because she would have had a meal anyway. is the money she spent. is the movie she didn’t see.* is zero, if there is no fee to enter the art gallery.
The following table refers to questions 2 and 3:
Anne
Meals Cooked per hour Customers Waited on per hour
Cook Full
Time
20
0
Cook and
Wait on
Customers
2
2
Sam
Meals Cooked per hour Customers Waited on per hour
Wait Full
Time
0
20
Cook and
Wait on
Customers
2
2
2.
According to the above table, if Anne and Sam each worked separately, how many meals per hour would be served by both of them?
a.
b.
c.
d.
e.
2
8
20
4*
40
3.
By Anne and Sam cooperating, according to the above table, the number of meals served increased by
a.
b.
c.
d.
e.
5 times.*
10 times
4 times.
8 times.
6 times
Semester 1 2013
Page 3 of 10
4.
Suppose Andy is selling Beatrice a unique piece of art which Beatrice would be willing to pay up to $100 but no more. Also, suppose Andy values the art at $50. Assume that
Andy is able to make a one-time offer to sell the art to Beatrice for $X. If a deal cannot be struck, Andy cannot sell the art to anyone else and Beatrice cannot purchase anything similar. In the spirit of the Ultimatum game, if Andy makes a one-time offer to Beatrice, what would be the most reasonable value of X?
a.
b.
c.
d.
e.
49
51
99*
101
None of the above.
5.
Which of the following is not held constant when constructing a demand curve for good X?
a.
b.
c.
d.
e.
Consumer (buyer) income
Consumer (buyer) tastes
Price of good X*
Prices of other goods
Sally spends her afternoon at the art gallery, paying $5 for her bus fares and $11 for food and drinks rather than spending an equal amount of money to go to a movie and have a similar meal at a similar price. The opportunity cost of going to the art gallery
a.
b.
c.
d.
e.
is less than the opportunity cost of going to the movies. equals $5 because she would have had a meal anyway. is the money she spent. is the movie she didn’t see.* is zero, if there is no fee to enter the art gallery.
The following table refers to questions 2 and 3:
Anne
Meals Cooked per hour Customers Waited on per hour
Cook Full
Time
20
0
Cook and
Wait on
Customers
2
2
Sam
Meals Cooked per hour Customers Waited on per hour
Wait Full
Time
0
20
Cook and
Wait on
Customers
2
2
2.
According to the above table, if Anne and Sam each worked separately, how many meals per hour would be served by both of them?
a.
b.
c.
d.
e.
2
8
20
4*
40
3.
By Anne and Sam cooperating, according to the above table, the number of meals served increased by
a.
b.
c.
d.
e.
5 times.*
10 times
4 times.
8 times.
6 times
Semester 1 2013
Page 3 of 10
4.
Suppose Andy is selling Beatrice a unique piece of art which Beatrice would be willing to pay up to $100 but no more. Also, suppose Andy values the art at $50. Assume that
Andy is able to make a one-time offer to sell the art to Beatrice for $X. If a deal cannot be struck, Andy cannot sell the art to anyone else and Beatrice cannot purchase anything similar. In the spirit of the Ultimatum game, if Andy makes a one-time offer to Beatrice, what would be the most reasonable value of X?
a.
b.
c.
d.
e.
49
51
99*
101
None of the above.
5.
Which of the following is not held constant when constructing a demand curve for good X?
a.
b.
c.
d.
e.
Consumer (buyer) income
Consumer (buyer) tastes
Price of good X*
Prices of other goods