Micro · Unit 2 · Paper 3

Supply & Demand unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1 Paper 2 Paper 3

Each paper is built from this unit’s 37 terms and is the same for everyone, so a teacher can assign “Unit 2, Paper 3” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.

Suggested time 32 min 29 points0/17 attempted

Complements

Perfectly inelastic demand

Price floor

Shortage

Income effect

Income elasticity of demand

Price elasticity of demand (PED)

Total revenue test

Excise tax incidence

Determinants of PED

Surplus

Market equilibrium

Short answer 1. Define or explain: Unit elastic demand

3 pts

Short answer 2. Define or explain: Normal good

3 pts

Short answer 3. Define or explain: Cross-price elasticity of demand

3 pts

Short answer 4. Define or explain: Price ceiling

3 pts

Free response

5 pts

This course has no free-response prompt tagged to this unit, so one from elsewhere in the course is used. It is still worth writing — the skill transfers.

SHORT FREE-RESPONSE. Ridgeline Dairy is one of many identical firms in a perfectly competitive market. The market price of milk is $6 per gallon. At Ridgeline’s profit-maximizing output of 100 gallons per day, average total cost is $8 and average variable cost is $5.

Explain the rule Ridgeline uses to choose its profit-maximizing output, and identify its marginal revenue.

Calculate Ridgeline’s daily economic profit or loss, showing your work.

Should Ridgeline continue operating in the short run? Justify your answer with a calculation.

Explain what happens in this market in the long run and what the price will be when adjustment is complete.