ECON 201 SEU Marginal Benefit and Invisible Hand Questions
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Assignment 1 Questions: Week 2 to Week 3:
1. Water is necessary for life. Is the marginal benefit of a glass of water large or small?
Give an example of some action from your real life that has both a monetary and
nonmonetary opportunity cost. (3 Mark)
2. What does the nvisible hand/f the marketplace do? Explain the two main
reasons of market failure and give an example of each. (3 Marks)
3. How does a price ceiling set below the equilibrium level affect quantity demanded
and quantity supplied? (3 Marks)
4. What would be the impact of imposing a price floor below the equilibrium price?
If a price floor benefits producer, why does a price floor reduce social surplus? (3
Marks)
5. Illustrates the market for Pizza has the following demand and supply
schedules: (3 Marks)
Price
$3
$4
$5
$6
$7
$8
Quantity
Demanded
115
95
80
67
50
38
Quantity
Supplied
37
55
80
95
110
122
a. Graph the demand and supply curves. What is the equilibrium price and
quantity in this market?
b. If the actual price in this market were above the equilibrium price, what would
drive the market toward the equilibrium?
c. If the actual price in this market were below the equilibrium price, what would
drive the market toward the equilibrium?
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