1. The data in the following table represents Canadian wheat market where, Qd and Qs are the quantity of wheat demanded and supplied in bushels per week respectively, and P is the price of wheat in dollars per bushel.

Price                Qd                  Qs      Surplus/Shortage   

10                   3,000              8,000              ---------                       

9                     3,500              7,000              ----------

8                     4,000              5,500              ----------

7                     4,500              4,500              ---------

6                     5,000              3,500              ----------

a) Draw a diagram for Canadian wheat market. Find the equilibrium price and quantity.  

b) Calculate the amount of surplus/shortage if the current market price is $8 per bushel. Analyze its impact on market price and quantity.

c) Calculate the amount of surplus/shortage if the current market price is $6 per bushel. Analyze its impact on market price and quantity.

2. Below is the production possibilities table for the country of Lavaland.

(a) Use the information in the Table to draw the production possibilities curve (PP1) for Lavaland. Put tanks on the horizontal axis.

(b) What is the cost to Lavaland of moving from point A to point B on its PP1?

(c) What is the cost to Lavaland of moving from point E to point F?

(d) What general economic principle is being illustrated by your answers to part (b) and (c) above? Explain. 

3. The data below show the total production (in millions) of the only two goods produced in the countries of Carleton and Cumbria.

Carleton 10 binoculars or 15 cameras

Cumbria 12 binoculars or 9 cameras

a) What is the opportunity cost of a binocular in Carleton?

b) What is the opportunity cost of a camera in Cumbria?

c) If, before trade, each country was devoting half its resources to producing each product, what is the total amount they were both producing?

d) If the two countries were to specialize in producing the product they do best, what would be the total amount they could produce?

e) What are the total gains as a result of specialization?

4. Stuff-Crust Pizza is a new pizza introduced by Pizza Hut. What happens to the equilibrium price and equilibrium quantity in each of the following situations?

Explain each situation with appropriate diagram.

a. Due to weather conditions, crop yield (including wheat) decreased.

b. The price of beer decreased

c. Dominos Pizza introduced a similar type of pizza that sold for $1 less than the one by Pizza Hut.

d. A recession reduced households' income.

e. A new oven technology reduced the time it takes to bake a pizza.