Unit 2 Homework Assignment Assignment 2 (50 points) Prompt: Complete the unit homework questions below and submit them. Predict the direction of change for either supply or demand in the following s

Unit 2 Homework Assignment

Assignment 2 (50 points)

    • Prompt: Complete the unit homework questions below and submit them.
  1. Predict the direction of change for either supply or demand in the following situations:
  2. Several new companies enter the cell phone industry.
  3. Consumers suddenly decide SUVs are unfashionable.
  4. The U.S. surgeon general issues a report stating that tomatoes prevent colds.
  5. Frost threatens to damage the coffee crop, and consumers expect the price to rise sharply in the future.
  6. The price of tea falls. What is the effect on the coffee market?
  7. The price of sugar rises. What is the effect on the coffee market?
  8. Tobacco lobbyists convince Congress to remove the tax paid by sellers on each carton of cigarettes sold.
  9. A new type of robot is invented that will pick peaches.
  10. Nintendo anticipates that the future price of its games will fall much lower than the current price.
  1. The U.S. Postal Service is facing increased competition from firms providing overnight delivery of packages and letters. Additional competition has emerged because communications can be sent by emails, fax machines, and text messages. What will be the effect of this competition on the market demand for mail delivered by the post office?
  1. Consider this statement: “Government involvement in markets is inherently inefficient.” Do you agree or disagree? Explain.
  1. Which of the following are public goods?

A. Airbags

B. Pencils

C. Cycle helmets

D. City streetlights

E.Contact lenses

  1. Consider the following demand schedule:


Quantity Demanded

Elasticity Coefficient











What is the price elasticity of demand between:

A. P=$25 and P=$20?

B. P=$20 and P=$15?

C. P=$15 and P=$10?

D. P=$10 and P=$5?

  1. Will each of the following changes in price cause total revenue to increase, decrease, or remain unchanged?

A. Price falls, and demand is elastic.

B. Price rises, and demand is elastic.

C. Price falls, and demand is unitary elastic.

D. Price rises, and demand is unitary elastic.

E. Price falls, and demand is inelastic.

F. Price rises, and demand is inelastic.

  1. Opponents of increasing the tax on gasoline argue that the big oil companies just pass the tax along to the consumers. Do you agree or disagree? Explain your answer.
  1. Do you agree with the following statement? “If you like tacos, you should consume as many as you can.”
  1. Suppose your marginal utility for meals at the campus cafeteria this week has fallen to zero. Explain what has happened to your total utility curve derived from consuming these meals. Now, explain what will happen to total utility if you eat more meals at the cafeteria this week.
  1. Suppose the price of a BMW falls. Explain the law of demand based on the income and substitution effects.

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