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