Regulation and Antitrust Policy (Econ 180)
Drake University, Spring 2011
William M. Boal

Course page: www.drake.edu/cbpa/econ/boal/180
Blackboard: bb.drake.edu
Email: william.boal@drake.edu

QUIZ 1 ANSWER KEY
Demand and Supply

Version A

I. Multiple choice [2 pt each: 18 pts total]

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

II. Problems

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

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

  1. Q* = 80 and P* = $6;
  2. Total revenue = $480;
  3. Demand curve has P-intercept at $14 and slope of -1/10, supply curve has P-intercept at $2 and slope of +1/20.

(3) [Simultaneous equations: 12 pts] x1 = 80, x2 = 40.

(4) [Equilibrium: 8 pts]

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

(5) [Price elasticity of demand: 4 pts]

  1. -0.25;
  2. inelastic.

(5) [Price elasticity of demand: 10 pts]

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

(7) [Price elasticity of demand: 10 pts]

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

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

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

Version B

I. Multiple choice [2 pt each: 18 pts total]

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

II. Problems

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

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

  1. Q* = 60 and P* = $12;
  2. Total revenue = $720;
  3. Demand curve has P-intercept at $15 and slope of -1/20, supply curve has P-intercept at $6 and slope of +1/10.

(3) [Simultaneous equations: 12 pts] x1 = 60, x2 = 80.

(4) [Equilibrium: 8 pts]

  1. excess demand;
  2. $6;
  3. 4 units;
  4. $24.

(5) [Price elasticity of demand: 4 pts]

  1. -1.5;
  2. elastic.

(5) [Price elasticity of demand: 10 pts]

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

(7) [Price elasticity of demand: 10 pts]

  1. decrease;
  2. about 12 percent;
  3. decrease;
  4. about 2 percent;
  5. elastic.

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

  1. increase;
  2. about 3 percent;
  3. increase;
  4. about 9 percent.

[end of answer key]