Question 1
Record U.S. corn crop, up 24%, is forecast. The USDA reported that world corn production will be 9.9 percent greater than last year’s, while U.S. corn production will be 24 percent larger. The price of corn is expected to be 46 percent higher than last year’s price. Did Starbucks start a pumpkin boom? Ever since Starbucks introduced its famed pumpkin spice latte about a Decade ago, pumpkin sales have skyrocketed. The price of pumpkin increased from $286 per ton in 2000 to $732 per ton in 2014 (both prices in 2014 dollars) and the quantity produced increased from 423,000 tons in 2000 to 657,150 in 2014. Calculate the U.S. price elasticity of supply of pumpkin: Is its supply elastic?
Question 2
A survey found that when incomes increased by 10 percent, the following changes in the quantities demanded occurred: spring water up by 5 percent; sports drinks down by 2 percent; cruises up by 15 percent. For which good is demand income elastic? For which good is income inelastic? Which goods are normal goods?
The table shows the demand and supply schedules for sandwiches. Use the table to work Questions 3 & 4.
Question 3
Calculate the equilibrium price of a sandwich, the consumer surplus, and the producer surplus. What is the efficient quantity of sandwiches?
Question 4
If Sandwiches To Go, Inc., buys all the sandwich producers and cuts pro- duction to 100 sandwiches an hour, what is the deadweight loss that is created? If Sandwiches To Go, Inc. rations sandwiches to two per person, by what view of fairness would the allocation be unfair?
