TABLE OF CONTENTS

Question 1 of 3

Work it Out
true
true
You must read each slide, and complete any questions on the slide, in sequence.

Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual out-put combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Maximum annual Output options Quantity of potatoes (pounds) Quantity of fish (pounds)
A 1,00 0
B 800 300
C 600 500
D 400 600
E 200 650
F 0 675
Table

Using the data in the table above which of the following graphs depicts the production possibility frontier with potatoes on the horizontal axis and fish on the vertical axis.

0:10

1.

What is the capital of Oregon?

Correct.
Incorrect.

Suppose the tires used on pickup trucks are found to be defective. Using the following graph, what do you expect will happen to demand and supply in the market for pickup trucks?

0:10

Suppose that the U. S. Department of Transportation imposes costly regulations on manufacturers that cause them to reduce supply by one- third at any given price. Calculate the new supply schedule by filling in the blanks in this table (quantities should include one decimal place, i.e. 15.0). Based on your findings, identify the new equilibrium price and the new equilibrium quantity.

Price of truck Quantity of trucks demanded (millions) Quantity of trucks supplied(millions) Quantity of trucks supplied after regulations (millions)
$20,000 20 14
25,000 18 15
30,000 16 16
35,000 14 17
40,000 12 18
Table

The new equilibrium price is $ (no decimals).

The new equilibrium quantity is (no decimals).

To find the correct answers you will multiply quantity supplied by two-thirds for all the prices listed. So at a price of $20,000 the manufactures will supply a quantity of 14*2/3 or 9.3 million trucks. At a price of $25,000 the manufacturers will supply a quantity of 15*2/3 or 10.0 million trucks, and so on. The new equilibrium price and quantity will be found where quantity demand equals the new quantity supplied. This occurs at a price of $40,000 and a quantity of 12 million trucks. For further review see section “What Happens When the Supply Cure Shifts”
To find the correct answers you will multiply quantity supplied by two-thirds for all the prices listed. So at a price of $20,000 the manufactures will supply a quantity of 14*2/3 or 9.3 million trucks. At a price of $25,000 the manufacturers will supply a quantity of 15*2/3 or 10.0 million trucks, and so on. The new equilibrium price and quantity will be found where quantity demand equals the new quantity supplied. This occurs at a price of $40,000 and a quantity of 12 million trucks. For further review see section “What Happens When the Supply Cure Shifts”