I guess that the circumference of the earth is about:

1
I guess that the circumference of the earth is
about

1. 5,000 miles
2. 10,000 miles
3. 15,000 miles
4. 25, 000 miles
5. 30,000 miles
6. 35,000 miles
7. 45,000 miles
8. 55,000 miles
9. 65,000 miles
10. 75,000 miles

2
The circumference of the earth is about

1. 5,000 miles
2. 10,000 miles
3. 15,000 miles
4. 25, 000 miles
5. 30,000 miles
6. 35,000 miles
7. 45,000 miles
8. 55,000 miles
9. 65,000 miles
10. 75,000 miles

3
What is it really?

• 24,901 miles

4
Firms in an industry have 500 fixed costs,
variable costs of 20 per unit, and capacity of
50 units. In the long run there is free entry and
exit. What is the long run equilibrium price?

1. 20
2. 50
3. 30
4. 25

5
A competitive firm has fixed costs of 10,000,
capacity of 1000 and variable costs of 5 per
unit. In the short run if the price of the
good falls from 15 to 7.50, the firm will

1. Produce zero
2. Produce 1000 units
3. Produce 500 units.
4. Produce 250 units.

6
A competitive firm has fixed costs of 10,000,
capacity of 1000 and variable costs of 5 per
unit. In the short run if the price of the
good falls from 15 to 4, the firm will

1. Produce zero
2. Produce 1000 units
3. Produce 500 units.
4. Produce 250 units.

7
And on to our lecture
8
If the demand curve is a downward-sloping
straight line, then the elasticity of demand is
the same everywhere along the line.

1. True
2. False

9
Why is that?

• The elasticity of demand is NOT the slope of the
  demand curve. It is the ratio of percentage
  change in quantity to percentage change in price.
  
• Read p 411 of textbook to see how to calculate
  elasticity along a straight line demand curve.

10
The price elasticity of demand for rental
housing is 1, and the price elasticity of supply
is 1/4. Municipal authorities set a rent
ceiling 20 below the equilibrium price. The
number of units rented

1. Increases by 20.
2. Decreases by 20.
3. Decreases by 5.
4. Increases by 25.
5. Decreases by 10.

11
Why is that?

• The price quantity combination moves along the
  supply curve. (Landlords are not compelled to
  rent.)
• Since supply elasticity is ¼ , a 20 fall in
  price leads to a 5 fall in quantity supplied.

12
The supply curve is horizontal at 10. The
demand curve has formula P100-Q. A sales tax of
10 per unit is imposed. What is the excess
burden of this tax?

1. 20
2. 30
3. 40
4. 50
5. 60

13
Here is the picture
Price
Slope of demand curve is 1. Excess burden is
Triangle A Area of A is 10x10/250
100
P100-Q
20
A
10
Quantity
100
14
Happy Trails