Question

Consider the statements below: Julia is indifferent between orange juice and guava juice but she cannot decide how she feels about watermelon juice. Paul likes harmonica more than violin, violin more than flute, and flute more than harmonica. For both the statements, identify which consumer preference assumption is violated. Question 1 options: The completeness and rankability assumption is violated in statement I and the assumption that consumers like variety is violated in statement II. The transitivity assumption is violated in statement I and the assumption that consumers like variety is violated in statement II. The transitivity assumption is violated in statement I and the completeness and rankability assumption is violated in statement II. The completeness and rankability assumption is violated in statement I and the transitivity assumption is violated in statement II.

Question 2 (1 point) Read the following for next two questions: The inverse supply of masks is given by P = 4 + QS P = 4 + Q S . The inverse demand of masks is given by P = 20 − 3QD P = 20 - 3 Q D . What is the equilibrium price and quantity of masks? Question 2 options: Equilibrium price = $8; Equilibrium quantity = $4 Equilibrium price = $12; Equilibrium quantity = $8 Equilibrium price = $6; Equilibrium quantity = $2 Equilibrium price = $10; Equilibrium quantity = $6

Question 3 (2 points) The inverse supply of masks is given by P = 4 + QS P = 4 + Q S . The inverse demand of masks is given by P = 20 − 3QD P = 20 - 3 Q D . What is the consumer and producer surplus? Question 3 options: Producer surplus = $24; Consumer surplus = $8 Producer surplus = $8; Consumer surplus = $24 Producer surplus = $12; Consumer surplus = $20 Producer surplus = $20; Consumer surplus = $12

Answer 1

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1) Julia is indifferent between orange juice and guava juice but she cannot decide how she feels about watermelon juice

Preferences: Orange juice = guava juice But information about watermelon is not given

The completeness and rankability assumption is violated in statement I.

Paul likes harmonica more than the violin, violin more than a flute, and flute more than harmonica.

Preferences: harmonica more than the violin H > V

  violin more than a flute    V > F

flute more than harmonica F > H

H>V>F>H the transitivity assumption is violated in statement II.

option 4) is correct.

2)

supply of masks => P = 4 + QS

demand of masks => P = 20 − 3QD

In equilibrium => Demand = Supply

4 + Q = 20 - 3Q

Q+3Q = 20-4

4Q = 16

Q = 16/4 = 4

Put Q=4 in the demand function

P = 20-3*4 = 20-12 = 8

Equilibrium price = $8; Equilibrium quantity = $4

Option 1) is correct.

3)

supply of masks => P = 4 + QS

demand of masks => P = 20 − 3QD

In equilibrium => Demand = Supply

4 + Q = 20 - 3Q

Q+3Q = 20-4

4Q = 16

Q = 16/4 = 4

Put Q=4 in the demand function

P = 20-3*4 = 20-12 = 8

Producer surplus = $8; Consumer surplus = $24