Practice Questions for Experiments 1 & 2


THE NEXT TWO QUESTIONS ARE BASED ON THE FOLLOWING SITUATION:  Consider a market 
with 15 suppliers, each of whom will sell at most one unit of the good.  The 
distribution of seller costs (or reservation prices) for these suppliers is as 
follows:

	Seller Cost		Number of Sellers
	$10		2
	$20		3
	$30		1
	$40		7
	$50		2

1.  If the price for this good is $38 per unit, how many units of the good will 
be supplied?

a) 5
b) 6
c) 9
d) 13
e) 15

2.  If the price for this good is $22 per unit, and the quantity sold at this 
price is the quantity implied by the supply curve, what is producer surplus (or 
suppliers’ profits)?

a) $20
b) $24
c) $30
d) $47
e) $70


THE NEXT TWO QUESTIONS ARE BASED ON THE FOLLOWING SITUATION:  Consider a market 
with 10 consumers, each of whom will buy at most one unit of the good.  The 
distribution of buyer values (or reservation prices) for these consumers is as 
follows:

	Buyer Value		Number of Buyers
	$10		3
	$20		1
	$30		2
	$40		4

3.  If the price for this good is $15 per unit, how many units of the good will 
be demanded?

a) 3
b) 4
c) 6
d) 7
e) 10

4.  If the price for this good is $25 per unit, and the quantity purchased at 
this price is the quantity implied by the demand curve, what is consumer surplus 
(or buyers’ profits)?

a) $60
b) $70
c) $80
d) $90
e) $100


THE NEXT THREE QUESTIONS ARE BASED ON THE FOLLOWING SITUATION:  A small tropical 
island has a banana market with 35 banana growers and 45 banana consumers.  Each 
banana grower can sell at most one sack of bananas.  Each banana consumer can 
buy at most one sack of bananas.  There are 10 low-cost banana producers, each 
of whom can produce bananas at a cost of $15 per sack, and there are 25 high-
cost banana producers, each of whom can produce bananas at a cost of $30 per 
sack.  There are 30 consumers who are willing to pay up to $40 a sack and 15 
consumers who are willing to pay up to $20 a sack for bananas.

5.  What is the competitive equilibrium price of bananas on this island?

a) $20
b) $30
c) $15
d) $35
e) $40

6.  What is the competitive equilibrium number of sacks of bananas sold on this 
island?

a) 10
b) 25
c) 30
d) 15
e) 50

7.  In competitive equilibrium, the total amount of profit made by banana 
growers on this island will be:

a) $285
b) $100
c) $250
d) $200
e) $150


THE NEXT THREE QUESTIONS ARE BASED ON THE FOLLOWING SITUATION:  Every day at the 
local fish market, there are 100 demanders who are willing to pay up to $30 for 
a fish, 100 demanders who are willing to pay up to $20 for a fish, and 100 
demanders who are willing to pay up to $10 for a fish.  No demander wants to buy 
more than one fish.  There are 20 fishermen who sell fish in this market.  Each 
day, the fishermen arrive at the market with that day's catch.  Each fisherman 
has spent $100 on fuel for his boat the night before, but they have no other 
costs.  Any fish not sold on the same day they are caught will rot and become 
worthless.  Every day the fish market reaches a competitive equilibrium price 
for the day's fish.  On Monday, each fisherman caught 3 fish; on Tuesday, each 
fisherman caught 4 fish; on Wednesday, each fisherman caught 8 fish; on 
Thursday, each fisherman caught 12 fish; and on Friday, each fisherman caught 16 
fish.

8.  What was the price of fish on Thursday?

a) $35
b) $30
c) $20
d) $15
e) $10

9.  On which day did the fishermen earn the greatest profit?

a) Monday
b) Tuesday
c) Wednesday
d) Thursday
e) Friday

10.  Suppose that the cost of fuel for a day's fishing rises from $100 to $150.  
Assuming that the fishermen all continue to fish, what would be the effect of 
this increase in fuel costs on the price of fish on those days when each 
fisherman catches 12 fish?

a) There would be no effect on price.
b) The price per fish would rise by about $12.50 per fish.
c) The price of fish would rise by about $6 per fish.
d) The price of fish would fall.
e) The price of fish would rise by about $3 per fish.


11.  Consider a market in which the demand curve is given by a straight line 
with the equation P=100-Q (over the range of quantities from 0 to 100) and the 
supply curve is given by a straight line with the equation P=10+Q/2.  In this 
situation, what is the competitive equilbrium price?

a) $60
b) $10
c) $30
d) $20
e) $40


For those who want extra practice, here is another version of the banana market 
question, with different numbers.

THE NEXT THREE QUESTIONS ARE BASED ON THE FOLLOWING SITUATION:  A small tropical 
island has a banana market with 60 banana growers and 40 banana consumers.  Each 
banana grower can sell at most one sack of bananas.  Each banana consumer can 
buy at most one sack of bananas.  There are 35 low-cost banana producers, each 
of whom can produce bananas at a cost of $15 per sack, and there are 25 high-
cost banana producers, each of whom can produce bananas at a cost of $30 per 
sack.  There are 20 consumers who are willing to pay up to $40 a sack and 20 
consumers who are willing to pay up to $20 a sack for bananas.

12.  What is the competitive equilibrium price of bananas on this island?

a) $20
b) $30
c) $15
d) $35
e) $40

13.  What is the competitive equilibrium number of sacks of bananas sold on this 
island?

a) 35
b) 25
c) 20
d) 15
e) 50

14.  In competitive equilibrium, the total amount of profit made by banana 
growers on this island will be:

a) $335
b) $125
c) $275
d) $225
e) $175


Correct Answers:

1.  b
2.  c
3.  d
4.  b
5.  b
6.  c
7.  e
8.  e
9.  c
10.  a
11.  e
12.  a
13.  a
14.  e