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

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;
3. increase;
5. inelastic.

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

1. increase;
3. increase;

### 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;