The equilibrium price of coffee mugs rose sharply last month, but the equilibrium quantity was the same as ever. Three people tried to explain the situation. Which explanations could be right? Explain your logic.

A price change causes the quantity demanded of a good to decrease by 30 percent, while the total revenue of that good increases by 15 percent. Is the demand curve elastic or inelastic? Explain.

Suppose the price elasticity of demand for heating oil is $0.2$ in the short run and $0.7$ in the long run.

Why might this elasticity depend on the time horizon?

"Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.

Why might this elasticity depend on the time horizon?"

"Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:

$$\begin{array}{rcc} \text { Price } & \begin{array}{c} \text { Quantity Demanded } \\ \text { (business travelers) } \end{array} & \begin{array}{c} \text { Quantity Demanded } \\ \text { (vacationers) } \end{array} \\ \hline \$ 150 & 2,100 \text { tickets } & 1,000 \text { tickets } \\ 200 & 2,000 & 800 \\ 250 & 1,900 & 600 \\ 300 & 1,800 & 400 \end{array}$$

Why might vacationers have a different elasticity from business travelers?"

You are the curator of a museum. The museum is running short of funds, so you decide to increase revenue. Should you increase or decrease the price of admission? Explain.

Suppose that business travelers and vacationers have the following demand for airline tickets from Chicago to Miami:

$$\begin{array}{ccc} \text { Price } & \begin{array}{c} \text { Quantity Demanded } \\ \text { (business travelers) } \end{array} & \begin{array}{c} \text { Quantity Demanded } \\ \text { (vacationers) } \end{array} \\ \hline \$ 150 & 2,100 \text { tickets } & 1,000 \text { tickets } \\ 200 & 2,000 & 800 \\ 250 & 1,900 & 600 \\ 300 & 1,800 & 400 \end{array}$$

Why might vacationers and business travelers have different elasticities ?

Consider the following events: Scientists reveal that eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges

"A survey shows an increase in drug use by young people. In the ensuing debate, two hypotheses are proposed:

Reduced police efforts have increased the availability of drugs on the street.

Cutbacks in education efforts have decreased awareness of the dangers of drug addiction.

How could information on what has happened to the price of drugs help us to distinguish between these explanations?"

The market for fertilizer is perfectly competitive. Firms in the market are producing output, but are currently making economic losses.

Assuming there is no change in either demand or the firms' cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market.

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. c. Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market.

The market for fertilizer is perfectly competitive. Firms in the market are producing output, but are currently making economic losses.

How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer?

A firm in a competitive market receives $500 in total revenue and has marginal revenue of$10. What is the average revenue, and how many units were sold?

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. What happens in the long run when the patent expires and other firms are free to use the technology?