Economics 3551 Lynn Paringer
Managerial Economics Spring, 2012
Practice for First Midterm
Questions 1-5
When the price of fringles is $425, 3275 are demanded. When the price of fringles is $780, 1500 are demanded. 1. Using this information and assuming the demand for fringles is a straight line, calculate the formula for the demand for fringles. Please write P as a function of Q.

2. Graph the demand for fringles.

3. Calculate the price, elasticity of demand, marginal revenue and P/MR when Q = 2400.

4. Calculate the price, quantity, elasticity of demand and P/MR when marginal revenue = $130.

5. Calculate the price, quantity, marginal revenue and P/MR when the elasticity of demand = -3.4.

6. Calculate the price, quantity, elasticity of demand and marginal revenue when the P/MR = 4.8.

7. Calculate the price and quantity at which total revenue is a maximum. What is maximum total revenue?

Questions 8-10
The demand for thingles can be written as: Q = 6,000 – 8P. The supply of thingles can be written as: Q = 6P. 8. Calculate the equilibrium price and quantity of thingles.

9. Now assume that the government has set the price of thingles at P = 500 and agreed to buy the surplus. Calculate the size of the surplus. Calculate the amount the government will spend on such a program.

10. Now suppose that, rather than buying the surplus, the government sets the price at P = 500 and decides to let the market clear. This means all that is produced at a price