Question

7. Suppose you are given the following market supply function for apples: QS = QS(P,  w,  m) where P is the price per unit of apples, w is the hourly wage rate the firm pays to workers and m is the price of materials used to grow apples.

From basic economics, how are QS and m related?

A. If the price of materials increases, the market-level quantity supply of apples increases. Thus, they are positively related.

B. If the price of materials decreases, the market-level quantity supply of apples decreases. Thus, they are inversely related.

C. If the price of materials increases, the market-level quantity supply of apples decreases. Thus, they are positively related.

D. If the price of materials increases, market-level quantity supply of apples decreases. Thus, they are inversely related.

8. Suppose you are given the following market demand function for apples: QD = QD (P,  I,  PSub) where Pis the price per unit of apples, I is consumer income and PSub is the price per unit of grapes (a substitute for apples). And given the market supply function for apples: QS = QS(P,  w,  m) where P is the price per unit of apples, w is the hourly wage rate the firm pays to workers and m is the price of materials used to grow apples.

Given the model, what are the endogenous variables?

A. The hourly wage rate and price of materials.

B. The price per unit of apples and quantity of apples.

C. Income and the price per unit of grapes.

D. The hourly wage rate, income, the price per unit of grapes, and the price of materials.

9. Suppose you are given the following market demand function for apples: QD = QD(P,  I,  PSub) where Pis the price per unit of apples, I is consumer income and PSub is the price per unit of grapes (a substitute for apples). And given the market supply function for apples: QS = QS(P,  w,  m) where P is the price per unit of apples, w is the hourly wage rate the firm pays to workers and m is the price of materials used to grow apples.

Given the model, what are the exogenous variables?

A. The hourly wage rate and price of materials.

B. The price per unit of apples and quantity of apples.

C. Income and the price per unit of grapes.

D. The hourly wage rate, income, the price per unit of grapes, and the price of materials.

10.Suppose you are given the following market demand function for apples: QD = QD(P,  I,  PSub) where Pis the price per unit of apples, I is consumer income and PSub is the price per unit of grapes (a substitute for apples). And given the market supply function for apples: QS = QS(P,  w,  m) where P is the price per unit of apples, w is the hourly wage rate the firm pays to workers and m is the price of materials used to grow apples.

Solving the model defines two functions, what are they?

A. The equilibrium price for apples which will depend on income, the price per unit of grapes, the wage rate and the price of materials.

B. The equilibrium price for grapes which will depend on income, the price per unit of grapes, the wage rate and the price of materials.

C. The equilibrium quantity of apples which will depend on income, the price per unit of grapes, the wage rate and the price of materials.

D. The equilibrium quantity of grapes which will depend on income, the price per unit of grapes, the wage rate and the price of materials.

Answer 1

7.

From basic economics, Quantity supplied is inversely related to the price of inputs used in the production of apples. If the price of materials used for production increases then cost of production increases implies quantity supplied of apples would fall as supply curve shifts to the left. The converse is true for a decrease in the price of materials used for the production of apples.

the correct option is B, D

8.

Endogenous variables are those variables which are implicitly determined in the equation. In the market demand equation and supply equation as well; price per unit of apples and quantity of apples.

the correct option is B

9.

Exogenous variables are variables which are given explicitly and not determined from the given equations. From the demand and supply equations given; exogenous variables are income, wage rate, the price of substitute goods and price of materials.

the correct option is D

10.

Market equilibrium exists when quantity demanded equals quantity supplied and solving the two equations gives the equilibrium price per unit apples as a function of income, price per unit grapes, the wage rate and price of materials.

the correct option is A