1) The following situation will be used to answer questions 1 through 5. (Adapted from chapter 3 problem 4)
Monthly demand and supply for a computer support service catering to small businesses can be represented by these equations:
Qd = 3000 – 10P
Qs = -1000 + 10 P
where Qd is the number of businesses demanding the services, Qs is the number of businesses that suppliers are willing to service, and P is the monthly fee, in dollars.
At what average monthly fee would demand equal zero?
3,000
300
-1000
100
2) Refer to the situation in question 1.
At what average monthly fee would supply equal zero?
3,000
300
-1000
100
3) Refer to the situation described in equation 1. What is the equilibrium price?
100
200
1000
4000
4) Refer to the situation in question 1. What is the equilibrium output level?
0
10
1000
3000
5) Refer to the situation in question 1.
Suppose demand increases and leads to a new demand curve:
Qd = 3500 – 10P
What will be the new equilibrium price and quantity?
P=0, Q=3500
P=200, Q=1500
P=225, 1250
P=350, 0