BB 107(summer) Tutorial 4(s) PDF

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BB 107

Tutorial 4

Part A: MCQ 1. The law of supply indicates that, other things equal: A. producers will offer more of a product at high prices than at low prices. B. the product supply curve is downsloping. C. consumers will purchase less of a good at high prices than at low prices. D. producers will offer more of a product at low prices than at high prices. 2. A firm's supply curve is upsloping because: A. the expansion of production necessitates the use of qualitatively inferior inputs. B. mass production economies are associated with larger levels of output. C. consumers envision a positive relationship between price and quality. D. beyond some point the production costs of additional units of output will rise. 3. A leftward shift of a product supply curve might be caused by: A. an improvement in the relevant technique of production. B. a decline in the prices of needed inputs. C. an increase in consumer incomes. D. some firms leaving an industry. 4. Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the: A. demand for oranges will necessarily rise. B. equilibrium quantity of oranges will rise. C. amount of oranges that will be available at various prices has declined. D. price of oranges will fall 5. In moving along a supply curve which of the following is not held constant? A. the number of firms producing this good B. expectations about the future price of the product C. techniques used in producing this product D. the price of the product for which the supply curve is relevant

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6. A government subsidy to the producers of a product: A. reduces product supply. B. increases product supply. C. reduces product demand. D. increases product demand. 7. If the demand and supply curves for product X are stable, a government-mandated increase in the price of X will: A. increase the supply of X and decrease the demand for X. B. increase the demand for X and decrease the supply of X. C. increase the quantity supplied and decrease the quantity demanded of X. D. decrease the quantity supplied of X and increase the quantity demanded of X. 8. The price elasticity of demand coefficient measures: A. buyer responsiveness to price changes. B. the extent to which a demand curve shifts as incomes change. C. the slope of the demand curve. D. how far business executives can stretch their fixed costs. 9. The demand for a product is inelastic with respect to price if: A. consumers are largely unresponsive to a per unit price change. B. the elasticity coefficient is greater than 1. C. a drop in price is accompanied by a decrease in the quantity demanded. D. a drop in price is accompanied by an increase in the quantity demanded. 10. Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is: A. 4.00. B. 2.09. C. 1.37. D. 3.94.

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Part B: Short Answer 1. Exchange Rates market. Use a separate diagram to show how each of the following factors affect demand or supply for “Ringgit”? (assume price of ringgit is US30cent per ringgit on y-axis and Quantity of ringgit on x-axis): a. Foreign firms selling Malaysian stock b. U.S. firms buy large quantity of palm oil from Malaysia. c. More Malaysians travelling to US for studies and holiday. d. Increased popularity of US made goods in Malaysia. 2. How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? a. Price falls and demand is inelastic. b. Price rises and demand is elastic. 3. (a) Define the price elasticity of demand (b) What is the shape of the demand curve for agricultural products? (c) Briefly explain how the following affect the quantity and total revenue of agricultural products(use a diagram to explain your answer) : (i) farmers experience a great harvest (ii) the farmers experience a prolong dry period 4. Graph the accompanying demand data, and then use the midpoint formula for Ed to determine price elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a nontechnical way why demand is elastic in the northwest segment of the demand curve and inelastic in the southeast segment....