Version A

I. Multiple choice [2 pt each: 20 pts total]

(1)c. (2)b. (3)b. (4)b. (5)e. (6)a. (7)b. (8)b. (9)a. (10)a.

II. Problems

(1) [Intro to antitrust: 4 pts] Antitrust policy is enforced by two U.S. federal agencies: the Justice Department and the Federal Trade Commission.

(2) [Demand and consumer surplus: 26 pts]

1. Q* = 60 and P* = $9;
2. Total revenue = $540;
3. Demand curve has P-intercept at $12 and slope of -1/20, supply curve has P-intercept at $3 and slope of +1/10.

(3) [Simultaneous equations: 12 pts] x₁ = 8, x₂ = 20.

(4) [Equilibrium: 12 pts]

1. excess demand;
2. $7;
3. 4 units;
4. $28;
5. sellers;
6. $24.

(5) [Price elasticity of demand: 8 pts]

1. perfectly inelastic: B;
2. inelastic: D;
3. unitary elastic: A;
4. elastic: E;
5. perfectly elastic: C.

(6) [Price elasticity of demand: 8 pts]

1. decrease;
2. about 3 percent;
3. increase;
4. about 2 percent.

(7) [Price elasticity of supply: 8 pts]

1. increase;
2. about 4 percent;
3. increase;
4. about 14 percent.

Version B

I. Multiple choice [2 pt each: 20 pts total]

(1)d. (2)a. (3)a. (4)a. (5)f. (6)b. (7)a. (8)a. (9)b. (10)b.

II. Problems

(1) [Intro to antitrust: 4 pts] Antitrust policy is enforced by two U.S. federal agencies: the Federal Trade Commission and the Justice Department.

(2) [Demand and consumer surplus: 26 pts]

1. Q* = 80 and P* = $5;
2. Total revenue = $400;
3. Demand curve has P-intercept at $13 and slope of -1/10, supply curve has P-intercept at $1 and slope of +1/20.

(3) [Simultaneous equations: 12 pts] x₁ = 16, x₂ = 28.

(4) [Equilibrium: 12 pts]

1. excess supply;
2. $4;
3. 5 units;
4. $20;
5. buyers;
6. $25.

(5) [Price elasticity of demand: 8 pts]

1. perfectly inelastic: D;
2. inelastic: A;
3. unitary elastic: C;
4. elastic: B;
5. perfectly elastic: E.

(6) [Price elasticity of demand: 8 pts]

1. increase;
2. about 4 percent;
3. decrease;
4. about 1 percent.

(7) [Price elasticity of supply: 8 pts]

1. increase;
2. about 5 percent;
3. increase;
4. about 15 percent.

[end of answer key]