AB224-Unit 3 Assignment: Problem 1 and 2

Name: -Teresa Webb
Course Number: -AB224
Section Number: -03
Unit Number: – 3
Date: -8/16/2013

Problem 1:

Suppose
that the supply schedule of Belgium Cocoa beans is as follows:

Price of cocoa beans
(per pound)

Quantity of cocoa beans
supplied
(pounds)

$40

900

$35

700

$30

500

$25

400

$20

200

Suppose
that Belgium cocoa beans can be sold only in Europe. The European demand schedule
for Belgium cocoa beans is as follows:

Price of Belgium cocoa
beans
(per pound)

European Quantity of
Belgium cocoa beans demanded
(pounds)

$40

100

$35

300

$30

500

$25

700

$20

900

a. Below
is the graph of the demand curve and the supply curve for Belgium cocoa beans. From
the supply and demand schedules above, what are the equilibrium price and
quantity of cocoa beans from Belgium?

.jpg” alt=”Slide1″>
Now suppose that Belgium cocoa
beans can be sold in the U.S. The U.S. demand schedule for Belgium cocoa beans
is as follows:

Price of Belgium cocoa
beans
(per pound)

U.S. Quantity of Belgium
cocoa beans demanded
(pounds)

$40

200

$35

400

$30

600

$25

800

$20

1000

b. What is
the combined (total) demand schedule for Belgian cocoa beans that European and
USA consumers buy?

Price of Belgium cocoa beans

U.S. Quantity of Belgium cocoa beans
demanded

European Quantity of Belgium cocoa beans
demanded

Total Demanded

(per pound)

(pounds)

(pounds)

(pounds)

$40

200

100

$35

400

300

$30

600

500

$25

800

700

$20

1000

900

Below
is the supply and demand graph that illustrates the new equilibrium price and
quantity of cocoa beans from Belgium.

.jpg” alt=”Slide2″>

c. From the
supply schedule and the combined U.S. and European demand schedule, what will be
the new price at which Belgium plantation owners can sell cocoa beans?

d. What price
will be paid by European consumers?

e. What will be
the quantity consumed by European consumers?

European consumers will consume 500
pounds of cocoa beans.

Problem
2

On Tuesday nights, a
local restaurant has a kid’s meal special. Nina’s son, Braden likes the
restaurant’s chicken nuggets, but Braden seems to be growing bigger every day
and the kid’s meal is usually not enough. The restaurant does allow for
additional purchase of chicken nugget servings. Nina’s willingness to pay for
each serving is shown in the table below.

Number of Chicken Nugget
servings
(servings)

Willingness to pay for
chicken nuggets
(per serving)

1

$5

2

$4

3

$3

4

$2

5

$1

6

$0

a.If the price of an
additional serving of chicken nuggets is $3, how many servings will Nina buy
for Braden? How much consumer surplus does he receive?

b.The
following week, Nina and Braden are back at the restaurant again, but now the
price of a serving of chicken nuggets is $4. By how much does his consumer
surplus decrease compared to the previous week?

c.One week
later, they return to the restaurant again. Nina discovers that the restaurant
is offering an “all-you-can-eat” special for $12. How many chicken nugget
servings will Braden eat, and how much consumer surplus does he receive now?

d.Suppose
you own the restaurant and Braden is a “typical” customer. What is the highest
price you can charge for the “all-you-can-eat” special and still attract
customers?

Grading
Rubric

Microeconomics:
Unit 3 Assignment: Supply and Demand Curves; Consumer Surplus

Content

Points
Possible

Points
Earned

Problem 1: Supply and Demand Curves
·
Used the demand and supply curve graph and the demand and
supply schedules given for problem 1a to determine the equilibrium price
·
Used the demand and supply curve graph and the demand and
supply schedules given for problem 1a to determine the equilibrium quantity.
·
Completed the chart by providing the combined (total) demand
schedule at the various levels given for problem 1b.
·
Determined the new price based on the supply schedule and
combined U.S. and European demand schedule given for problem 1c.
·
Determined the price that will be paid by European consumers for
problem 1d.
·
Determined the quantity consumed by European consumers for
problem 1e.

12

Problem 2: Consumer Surplus
·
Determined how many servings Nina is willing to buy for
Braden and the consumer surplus for problem 2a.
·
Determined how much the consumer surplus decreased compared to
the previous week for problem 2b.
·
Determined how many servings Braden will eat and for problem 2c.

·
Determined the highest price that could be charged and still
attract the consumer surplus for problem 2d.

8

Writing(5 pts)

Correct
use of APA 6th edition format, all sources used to support the
paper are referenced

2

Sentences
are clear, concise, and direct; tone is appropriate, spelling, grammar, and punctuation
are correct.

3

Total

25