Problem # 1
Among the following groups-senior executives, junior executives, and students- which is likely to have the most and which is likely to have the least price-elastic demand for membership in the Association of Business Professionals?
Problem # 2
Ann lives in Princeton, New Jersey, and commutes by train each day to her job in New York City (20 round trips per month). When the price of a round trip goes up from $10 to $20, she responds by consuming exactly the same number of trips as before, while spending $200 per month less on restaurant meals. (LO3, LO4)
a. Does the fact that her quantity of train travel is completely unresponsive to the price increase imply that Ann is not a rational consumer?
b. Explain why an increase in train travel might affect the amount she spends on restaurant meals.
Problem # 3
For the demand curve shown, find the total amount of consumer surplus those results in the gasoline market if gasoline sells for $2 per gallon.
Problem # 4
For the pizza seller whose marginal, average variable, and average total cost curves are shown in the accompanying diagram, what is the profit-maximizing level of output and how much profit will this producer earn if the price of pizza is $2.50 per slice?