Assignment 1 Semester 2 Solution Guidelines
1. An improvement in technology tends to reduce the supply (shift it to the left).
1. True
2. False
The correct option is 2.
Technology tends to increase the supply (shift the curve to the right) by increasing productivity,
in other words it increases output per unit of input.
2. The market supply curve is the vertical summation of all the individual supply curves.
1. True
2. False
The correct option is 2.
The market supply is the horizontal summation of the individual supply curves, for each price;
it represents the sum of all the individual quantities supplied.
3. A normal good is one for which the income elasticity is greater than one.
1. True
2. False
The correct option is 2.
A normal good has an income elasticity greater than zero.
4. When output equals zero, total cost = fixed cost.
1. True
2. False
This study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:40:16 GMT -06:00
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, The correct option is 1.
5. Average total cost reaches a minimum where it intersects average variable cost.
1. True
2. False
The correct option is 2.
Average total cost reaches a minimum where it intersects marginal cost.
6. Consider the following demand and supply functions: Demand: Qd = 400 - 40P. Supply:
Qs = -100 + 60P. What is the equilibrium price and output?
1. P = R3 and Q = 80.
2. P = R10 and Q = 300.
3. P = R5 and Q = 200.
4. P = R15 and Q = 800.
The correct option is 3.
First set the demand function equal to the supply function (Qd = Qs). Then isolate the price
("P" term) on one side of the equation and solve the equation to get the equilibrium price.
400 - 40P = -100 + 60P
500 = 100P
Pe = 5
Now, substitute the price ("P" term) found in step 2 into either the supply or demand function.
Solve for equilibrium quantity.
Qe = 400 - 40(5)
Qe = 200
7. Assuming everything else remains unchanged, the equilibrium price of biltong will
decrease if …
This study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:40:16 GMT -06:00
https://www.coursehero.com/file/61946368/ECS2601-Assignment-1-Solution-Guidelinespdf/
1. An improvement in technology tends to reduce the supply (shift it to the left).
1. True
2. False
The correct option is 2.
Technology tends to increase the supply (shift the curve to the right) by increasing productivity,
in other words it increases output per unit of input.
2. The market supply curve is the vertical summation of all the individual supply curves.
1. True
2. False
The correct option is 2.
The market supply is the horizontal summation of the individual supply curves, for each price;
it represents the sum of all the individual quantities supplied.
3. A normal good is one for which the income elasticity is greater than one.
1. True
2. False
The correct option is 2.
A normal good has an income elasticity greater than zero.
4. When output equals zero, total cost = fixed cost.
1. True
2. False
This study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:40:16 GMT -06:00
https://www.coursehero.com/file/61946368/ECS2601-Assignment-1-Solution-Guidelinespdf/
, The correct option is 1.
5. Average total cost reaches a minimum where it intersects average variable cost.
1. True
2. False
The correct option is 2.
Average total cost reaches a minimum where it intersects marginal cost.
6. Consider the following demand and supply functions: Demand: Qd = 400 - 40P. Supply:
Qs = -100 + 60P. What is the equilibrium price and output?
1. P = R3 and Q = 80.
2. P = R10 and Q = 300.
3. P = R5 and Q = 200.
4. P = R15 and Q = 800.
The correct option is 3.
First set the demand function equal to the supply function (Qd = Qs). Then isolate the price
("P" term) on one side of the equation and solve the equation to get the equilibrium price.
400 - 40P = -100 + 60P
500 = 100P
Pe = 5
Now, substitute the price ("P" term) found in step 2 into either the supply or demand function.
Solve for equilibrium quantity.
Qe = 400 - 40(5)
Qe = 200
7. Assuming everything else remains unchanged, the equilibrium price of biltong will
decrease if …
This study source was downloaded by 100000840403022 from CourseHero.com on 03-04-2022 15:40:16 GMT -06:00
https://www.coursehero.com/file/61946368/ECS2601-Assignment-1-Solution-Guidelinespdf/
