1. The price of beef rises and yet it is observed that the sales of beef increase. Does this mean that the demand curve for beef is sloping upward? Explain.
2. Suppose a news article reports, "Poor wine-grape harvests in France have brought financial gains to Australian winemakers. Sales of Australian wines in France are booming and wine prices are the best ever"
a) How has the market for French wines been affected by the poor harvest?
b) How has the change in the French wine market affect the market for Australian wines?
3. What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases? (Hint: Look at all possible outcomes. There is more than one)
4. In Australia, governments set the fares that taxi owners/drivers can charge. At various times, taxi owners/drivers stage protests asking to be allowed to increase their taxi fares so that their total revenue will increase.
a) What are taxi owners/drivers assuming about the price elasticity of demand for taxi rides, given their confidence that an increase in price will increase their revenue?
b) Why do they have such an assumption? Is it a realistic assumption?
5. A monopolistically competitive firm is producing 50 units of output in the short run where marginal cost is $3.00, average total costs are $5.00, price is $4.50, average variable cost is $4.00 and marginal revenue is $3.00.
a) Represent the above in a graph and calculate how much profit is the firm making?
b) What output recommendation would you make for the firm?