Roles of a curator of a museum
PROBLEM SET NUMBER FOUR
1. You are the curator of a museum. The museum is running short of funds, so you decide to increase revenue. Should you increase or decrease the price of admission? Explain. 2. Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats: Value of first donut Value of second donut Value of third donut Value of fourth donut Value of fifth donut Value of sixth donut $0.60 $0.50 $0.40 $0.30 $0.20 $0.10
a. Use this information to construct Tammy’s demand curve for donuts. b. If the price of donuts is $0.20, how many donuts will Tammy buy? c. Show Tammy’s consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20? d. If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy’s consumer surplus? Show this change on your graph. 3. Which causes a shortage of a good, a price ceiling or a price floor? Justify your answer with a graph and explain why economists usually oppose controls on prices.
4.
20 18 16 14 12 10 8 6 5 4 2
Price
Supply
Demand
10
20
30
40
50
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80
Quantity
Answer the following questions based on the graph that represents J.R.’s demand for ribs per week at Judy’s Rib Shack. a. At the equilibrium price, how many ribs would J.R be willing to purchase? b. How much is J.R willing to pay for 20 ribs? c. What is the magnitude of J.R’s consumer surplus at the equilibrium price? d. At the equilibrium price, how many ribs would Judy be willing to sell? e. How high must the price of ribs be for Judy to supply 20 ribs to the market? f. At the equilibrium price, what is the magnitude of total surplus in the market? g. If the price of ribs rose to $10, what would happen to J.R’s consumer surplus? h. If the price of ribs fell to $5, what would happen to Judy’s producer surplus? i. Explain why the graph that is shown verifies the fact that the market equilibrium, (quantity) maximizes the sum of producer and consumer surplus. 5. Write down your answer for each question and explain. Price Quantity Quantity Demanded Supplied $0 12 0 $1 10 2 $2 8 4 $3 6 6 $4 4 8 $5 2 10 $6 0 12 1) Refer to the above table, which of the following price ceilings would be binding in this market? a. $2 b. $3 c. $4 d. $5 2) Refer to the above table, which of the following price floor would be binding in this market? a. $1 b. $2 c. $3d. d.$4 3) Suppose the government imposes a price ceiling of $1 on this market. What will be the size of the shortage in this market? 4) Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market? 5) Suppose the government imposes a price floor of $1 on this market. What will be the size of the surplus in this market? 4) Suppose the government imposes a price floor of $5 on this market. What will be the size of the surplus in this market?
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