Question

For these questions you are required to draw a properly labeled Supply/Demand graph with the initial curves labeled S1 and D1, then show which curve shifts by drawing a second curve labeled S2 or D2. State whether the equilibrium price and quantity would increase, decrease, or stay the same. You may just draw the graphs by hand on a separate piece of paper and then take a picture of the page(s) and include them as attachments when you answer these questions.

1. This question concerns a farmer in the Midwest who can grow either corn or soybeans. Corn is the major crop grown by this farmer. Corn is used in the production of ethanol, which the federal government has decreed by regulation that is must be added to the gasoline we purchase for our automobiles. Assume for these questions that the amount of ethanol added will make up 10% of the fuel we use.

A. The government reduces the amount of ethanol from 10% to 5%. What will this do to the demand curve for corn?

B. The government reduces the amount of ethanol from 10% to 5%. What will this do to the supply curve for soybeans?

2. The corn raised by this farmer is a major component of feed that is consumed by cattle raised for beef in the United States. Suppose the Surgeon General said that eating red meat had significant health benefits, thus increasing the demand for beef. What happens to the demand for corn?

3. The farmer harvests his corn crop and puts it in storage. (The farmer is a supplier of corn.) How does the farmer respond to an increase in the price of corn?

4. Two companies are the major suppliers of flat screen television sets. One is Sony and the other is Samsung. Samsung has developed new technology that significantly decreases the cost of producing flat screen television sets. A. How does this affect the supply curve for Samsung?B. How does this affect the demand curve for Sony?

5. This is a Multiple Choice question and you do not need to draw a graph for this one. Suppose robotic technology improves the results of abdominal surgery—less time to perform the surgery, faster recovery times, and fewer mistakes. What is the impact on the market for abdominal surgery using this new technology?

a.Demand for robot-assisted surgery will increase.

b. Hospitals will be slow to adopt the new technology fearing that it may result in lower prices.

c.The demand for surgical assistants will increase.

d. All of the above.

Answer 1