Practice Questions from Chapter 1

Here is a set of questions that you can use to practice drawing supply and demand curves and finding competitive equilibrium prices, quantities, and profits.  These questions are very similar to the first three questions on Quiz 1, but they have different numbers of suppliers and demanders and different seller costs and buyer values.
 
 
 

    1.   A small tropical island's banana market has 60 banana growers
        and 40 banana consumers. Each banana grower can sell at most one
        sack of bananas. Each consumer can consume either 0 or 1 sack of
        bananas. There are 35 low-cost banana producers, each of whom can
        produce bananas at a cost of $15 per sack and 25 high-cost banana
        producers, each of whom can produce bananas at a cost of $30 per
        sack. There are 20 consumers who are willing to pay up to $40 a
        sack and 20 consumers who are willing to pay up to $20 a sack for
        bananas. What is the competitive equilibrium price of bananas on
        this island?

        (a) $20
        (b) $30
        (c) $15
        (d) $35
        (e) $40

    2.          What is the competitive equilibrium number of sacks of
        bananas sold on this island?

        (a) 35
        (b) 25
        (c) 20
        (d) 15
        (e) 50

    3.
               In competitive equilibrium, the total amount of profit
        made by banana growers will be:

        (a) $335
        (b) $125
        (c) $275
        (d) $225
        (e) $175
 
 
 
 
 
 

Answers

 

 

         1.   A
         2.   A
         3.   E
 
 
 

One More Time

Here is yet another version of the banana market question.

    1.   A small tropical island's banana market has 35 banana growers
        and 45 banana consumers. Each banana grower can sell at most one
        sack of bananas. Each consumer can consume either 0 or 1 sack of
        bananas. There are 10 low-cost banana producers, each of whom can
        produce bananas at a cost of $15 per sack and 25 high-cost banana
        producers, each of whom can produce bananas at a cost of $30 per
        sack. There are 30 consumers who are willing to pay up to $40 a
        sack and 15 consumers who are willing to pay up to $20 a sack for
        bananas. What is the competitive equilibrium price of bananas on
        this island?

        (a) $20
        (b) $30
        (c) $15
        (d) $35
        (e) $40

    2.                     What is the competitive equilibrium number
        of sacks of bananas sold on this island?

        (a) 10
        (b) 25
        (c) 30
        (d) 15
        (e) 50

    3.
               In competitive equilibrium, the total amount of profit
        made by banana growers will be:

        (a) $285
        (b) $100
        (c) $250
        (d) $200
        (e) $150
 
 

                              Answers Again

 

 
 

         1.   B
         2.   C
         3.   E