Question

1) An incentive A) is the opposite of a tradeoff. B) could be a reward but could not be a penalty. C) could be either a reward or a penalty. D) could be a penalty but could not be a reward.

Answer 1

Answer 1

B.could be a rewards but could not be a penalty

Incentives act like motivators to initiate action or to increase productivity. These are never a penalty.

Answer 2

At $17 , the quantity demanded is 1200 and the quantity supplied is 1600. As quantity demanded < quantity supplied. We have a surplus of 400 units (1600-1400) of chocolates

Answer 3.

Three step analysis

The what? : increase in demand of chocolate and increase in cost of production

The why? : Due to Valentine's days

The effect: the increase in demand raises the price of chocolates. The increase in the cost of production , decreases the supply of chocolates increasing the price further.

increase in demand shifts the demand curve right wards. Decrease in supply increases the supply leftwards. The price increases from P0 to P1.

. Price Quantity Old Demand Curve New Demand Curve — Old Supply Curve — New Supply Curve

Note: the equilibrium quantity is indeterminable

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