Econ 2100 Assignment -Assume that the market for coffee

Subject: Economics    / General Economics

(1) Assignment is worth65marks. 62 marks for answers and 3 marks for presentation and neatness. The weighting for each question is based on the difficulty and depth of the question. Marks will be rewarded on the quality of the answer. The weighting does not necessarily signify how many points are required. For example: a 5-point question may not need 5 points (it may require less or more).

(2) State assumptions if necessary

(3) This is an individual assignment.

(4) Hand written assignments will not be accepted; however, you mayhand draw diagrams. If the drawings are illegible you will receive no marks (make sure you use a ruler and I can read your writing).

(5) Remember to fully label graphs and diagrams for full marks if not completely labelled marks will be reduced.

(6) Stable your assignment – assignments paper clips or not stapled will not be accepted

(7) Assignment is due: March 7for Tues Class and March 8for Wed Class at the beginning of class

(8) Late assignments will not be accepted unless there extenuating circumstances – please email if to discuss any issues prior to the due date.

Question 1: Assume that the market for coffee is perfectly competitive. Using diagrams, determine the impact on short-term, equilibrium price and quantity in the coffee market for each of the following:

a) The coffee crop is a bumper crop(excellent harvest)

b) There is news of the health benefits of coffee

c) The price of green tea decreases

d) There is political instability (war) in the world’s largest coffee producing country negatively impacting farmers and trade

e) There is a spike in the price of energy drinks and the price of milk decreases

**** For complete marks graphs must be fully labelled

(10 marks)

Question 2: The following data are the market supply and demand schedules for Economics Study Guides, which are products in a competitive market.

Price ($) Quantity Demanded (Qd) Quantity Supplied (QS)

10 1000 200

20 800 400

30 600 600

40 400 800

50 200 1000

a) Graphically construct the supply and demand schedules and determine the equilibrium price and quantity (5marks)

b) Suppose a tax of $ 10 per textbook (guide) is imposed on the producers. What will be the new equilibrium price paid by the consumers and the quantity of textbook demanded after the tax has been imposed? What will be the price the producers receive after the tax has been imposed? Would your answer change if the tax were imposed on the consumer instead of the producers? Explain. (10 marks)(This answer can be determined using a graph or mathematically)

c) Calculate the amount of tax collected and the negative impact of tax on economic surplue (dead weight loss). (6 marks)

Question 3:

The table gives a relationship between the workers and monthly production of golf carts.

Workers (per month) 0 1 2 3 4 5 6 7 8

Output (units per month) 0 1 3 6 12 17 20 22 23

Other Information:

• Fixed Costs are $ 5000 per month

• 1 worker is $ 3000 per month

a) Complete the following table. (note: that the marginal product and marginal cost should be entered midway between rows to emphasize that it is the resulting changing inputs/output – moving from one row to the next. Average product, total costs and average costs corresponds to fixed quantity of labour and should be entered in the appropriate row) (10 marks)


(L) Output

(Q) Marginal Product

(MP) Average Product (AP) Total Fixed Costs (TFC) Total Costs (TVC) Total Costs

(TC) Average Variable Costs

(AVC) Average Fixed Costs

(AFC) Average Total Costs

(ATC) Marginal Cost (MC)

0 – – – –

1 –








b) Plot both the marginal product and average product (5 marks)

c) Plot theS-R MC curve, AFC, ATC curve, and AVC curve. Indicate the cost minimization point. (10 marks)

Question 4:

Shirley loves pizza but eventually she tires of pizza. The table below shows how much Shirley is willing to pay for each successive slice of pizza.

Pizza Willingness to Pay

1st $ 18

2nd $ 16

3rd $ 13

4th $ 9

5th $ 4

6th $ 0

a) If Shirley eats 5 pizzas a week – what is the total value Shirley places on 5 pizzas? (2 marks)

b) If the market price is $ 10 per pizza how many will Shirley consume? (2 marks)

c) If the price is $ 10 what will be the consumer surplus Shirley gets from eating Pizza? (2 marks)