MBA701 QUESTIONS WITH VERIFIED ANSWERS 100% SOLVED| LATEST UPDATE
GUARANTEED PASS
Suppose the government wants to encourage Americans to exercise more, so it imposes a
binding price ceiling on the market for in-home treadmills. As a result, ____. With a binding
price ceiling (a price ceiling below equilibrium price), the quantity demanded exceeds the
quantity supplied, and that a shortage (excess demand) develops in the market.
When a tax is placed on the sellers of cell phones, the size of the cell phone market ____. A
tax on any good or service causes a fall in its quantity, and that the market for this good or
service shrinks. The price received by sellers after the tax is imposed decreases (and the
effective price paid by buyers increases).
An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the
supply curve ____. An excise tax placed on sellers of the product shifts supply curve to the
left (supply decreases) vertically by the amount of the tax. A tax on any good or service causes a
fall in its quantity, and that the market for this good or service shrinks. The price received by
sellers after the tax is imposed decreases (and the effective price paid by buyers increases).
Please see the instructor's video for details.
Refer to the accompanying figure. The resulting consumer and producer surplus at a price of
$25 are, respectively, ____. Producer surplus is the area of the triangle (1/2 × base × height)
between the price and the supply curve. Hence, according to the graph, when the price = $25,
producer surplus = 1/2 × base (which is 25-5) × height (which is 400) = $4,000. Consumer
surplus is the area of the triangle (1/2 × base × height) between the price and the demand
curve. When the price = $25, consumer surplus = 1/2 × base (which is 400) × height (which is
45-25) = $4,000.
Refer to the accompanying figure. Assume that the initial equilibrium price and quantity are
$10 and 500. If the price increases to $12, then consumer surplus ____. Consumer surplus is
the area of the triangle (1/2 × base × height) between the price and the demand curve.
According to the graph, when the price = $10, consumer surplus = 1/2 × base (which is 500) ×
height (which is 20-10) = $2,500. When the price increases to $12, consumer surplus now
, equals 1/2 × base (400) × height (20-12) = $1,600. Therefore, consumer surplus drops by 2,500 -
1,600 = $900. Another way to find the answer is that, when the price increases from $10 to $12,
consumer surplus drops due to some buyers exiting the market (the area of the triangle with
base of 100 and height of 2: $100) and remaining buyers paying higher price (the area of the
rectangle with a base of 400 and a height of 2: $800). Thus, consumer surplus drops by 100 +
800 = $900.
BuyerWillingness To PayCalvin$150.00Sam$135.00Andrew$120.00Lori$100.00
Refer to the accompanying table above. If the price of the product is $110, then who would be
willing to purchase the product? Willingness to pay denotes the maximum amount the
buyer will pay for that good. The consumer will be willing to buy the good if their WTP is
greater than or equal to the price. If the price is $110 in this example, Calvin, Sam, and Andrew
will be willing to purchase the product, as their WTP is higher than the price ($150, $135, and
$120, respectively).
If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the
price of ketchup will lead to a 4.8 percent ____, and that ketchup and hamburgers are ____.
[Cross-price elasticity of demand = % D Qd for good 1 / % D price of good 2]. If the cross-
price elasticity between ketchup and hamburgers is -1.2, this means a 4% increase in the price
of ketchup will lead to a 4.8% (4 × 1.2 = 4.8) decrease in demand for hamburger, indicating that
the 2 goods are complements. The sign of the cross-price elasticity of demand determines if the
two goods are substitutes or complements. A negative sign indicates that the two goods are
complements (an increase in the price of good 1 decreases the quantity demanded of good 1,
and leads to a decrease in demand for good 2, which is a complement). Hence, the relationship
between the price of good 1 and demand for good 2 is negative. Conversely, a positive sign
shows that the two goods are substitutes (an increase in the price of good 1 decreases the
quantity demanded of good 1, and leads to an increase in demand for good 2, which is a
substitute). Thus, the relationship between the price of good 1 and demand for good 2 is
positive.
If the price of pork chops falls from $8 to $6 and this leads to an increase in demand for apple
sauce from 100 to 140 jars, what is the (arc) cross-price elasticity of apple sauce and pork
chops? [Cross-price elasticity of demand = % D Qd of good 1 / % D price of good 2. % Δ Qd =
GUARANTEED PASS
Suppose the government wants to encourage Americans to exercise more, so it imposes a
binding price ceiling on the market for in-home treadmills. As a result, ____. With a binding
price ceiling (a price ceiling below equilibrium price), the quantity demanded exceeds the
quantity supplied, and that a shortage (excess demand) develops in the market.
When a tax is placed on the sellers of cell phones, the size of the cell phone market ____. A
tax on any good or service causes a fall in its quantity, and that the market for this good or
service shrinks. The price received by sellers after the tax is imposed decreases (and the
effective price paid by buyers increases).
An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline would shift the
supply curve ____. An excise tax placed on sellers of the product shifts supply curve to the
left (supply decreases) vertically by the amount of the tax. A tax on any good or service causes a
fall in its quantity, and that the market for this good or service shrinks. The price received by
sellers after the tax is imposed decreases (and the effective price paid by buyers increases).
Please see the instructor's video for details.
Refer to the accompanying figure. The resulting consumer and producer surplus at a price of
$25 are, respectively, ____. Producer surplus is the area of the triangle (1/2 × base × height)
between the price and the supply curve. Hence, according to the graph, when the price = $25,
producer surplus = 1/2 × base (which is 25-5) × height (which is 400) = $4,000. Consumer
surplus is the area of the triangle (1/2 × base × height) between the price and the demand
curve. When the price = $25, consumer surplus = 1/2 × base (which is 400) × height (which is
45-25) = $4,000.
Refer to the accompanying figure. Assume that the initial equilibrium price and quantity are
$10 and 500. If the price increases to $12, then consumer surplus ____. Consumer surplus is
the area of the triangle (1/2 × base × height) between the price and the demand curve.
According to the graph, when the price = $10, consumer surplus = 1/2 × base (which is 500) ×
height (which is 20-10) = $2,500. When the price increases to $12, consumer surplus now
, equals 1/2 × base (400) × height (20-12) = $1,600. Therefore, consumer surplus drops by 2,500 -
1,600 = $900. Another way to find the answer is that, when the price increases from $10 to $12,
consumer surplus drops due to some buyers exiting the market (the area of the triangle with
base of 100 and height of 2: $100) and remaining buyers paying higher price (the area of the
rectangle with a base of 400 and a height of 2: $800). Thus, consumer surplus drops by 100 +
800 = $900.
BuyerWillingness To PayCalvin$150.00Sam$135.00Andrew$120.00Lori$100.00
Refer to the accompanying table above. If the price of the product is $110, then who would be
willing to purchase the product? Willingness to pay denotes the maximum amount the
buyer will pay for that good. The consumer will be willing to buy the good if their WTP is
greater than or equal to the price. If the price is $110 in this example, Calvin, Sam, and Andrew
will be willing to purchase the product, as their WTP is higher than the price ($150, $135, and
$120, respectively).
If the cross-price elasticity between ketchup and hamburgers is -1.2, a 4 percent increase in the
price of ketchup will lead to a 4.8 percent ____, and that ketchup and hamburgers are ____.
[Cross-price elasticity of demand = % D Qd for good 1 / % D price of good 2]. If the cross-
price elasticity between ketchup and hamburgers is -1.2, this means a 4% increase in the price
of ketchup will lead to a 4.8% (4 × 1.2 = 4.8) decrease in demand for hamburger, indicating that
the 2 goods are complements. The sign of the cross-price elasticity of demand determines if the
two goods are substitutes or complements. A negative sign indicates that the two goods are
complements (an increase in the price of good 1 decreases the quantity demanded of good 1,
and leads to a decrease in demand for good 2, which is a complement). Hence, the relationship
between the price of good 1 and demand for good 2 is negative. Conversely, a positive sign
shows that the two goods are substitutes (an increase in the price of good 1 decreases the
quantity demanded of good 1, and leads to an increase in demand for good 2, which is a
substitute). Thus, the relationship between the price of good 1 and demand for good 2 is
positive.
If the price of pork chops falls from $8 to $6 and this leads to an increase in demand for apple
sauce from 100 to 140 jars, what is the (arc) cross-price elasticity of apple sauce and pork
chops? [Cross-price elasticity of demand = % D Qd of good 1 / % D price of good 2. % Δ Qd =
