Gezira College of Technology

Biomedical Engineering
Economic Engineering Batch 11 Sem8
Economic Engineering 2023
Question one
Put a circle around the right answer

1. Suppose the number of engineers graduating from college increases at the same
time as the demand for engineer’s increases. Which one of the following is true?

a. The number of engineers employed will increase, and engineer wages will
increase.

b. The number of engineers employed will increase, and engineer wages will
decrease.

c. The number of engineers employed will increase, but the effect on engineer
wages is ambiguous.

d. Engineer wages will increase, but the effect of the number of engineers
employed is ambiguous.

e. The effect on both engineer wages and the number of engineers employed I
ambiguous.

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2. A bike shop in a small town has received a shipment of 10 new bicycles. The
shop offers the bikes for sale at a price of $300 each. At this price, however, there
are only two people in town who are willing to buy a bicycle. This situation can be
described as

a. disequilibrium

b. shortage

c. surplus

d. equilibrium

e. both a and c are correct

3. At the end of a hot day, ten people want to buy a glass of lemonade. However,
the local lemonade stand only has five glasses of lemonade left. The lemonade
stand operator sells the remaining five glasses to the five people who are willing
and able to pay the most. This is an example of …

a. a surplus

b. rationing by price

c. disequilibrium

d. a shift in the demand curve

e. a lottery

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4. Suppose there is a drought that reduces the harvest of corn. At the same time, the
demand for corn increases due to expanded use of ethanol fuels. Which one of the
following statements is true?

a. The price of corn will increase, but the effect on the quantity of corn sold is
ambiguous.

b. The price of corn will decrease, but the effect on the quantity of corn sold is
ambiguous.

c. The quantity of corn sold will increase, but the effect on the price of corn is
ambiguous.

d. The quantity of corn sold will decrease, but the effect on the price of corn is
ambiguous.

e. The effect on both the quantity of corn sold and the price of corn is ambiguous.

5. Which one of the following would be most likely to increase (shift to the right)
the demand curve for public transportation?

a. Increasing the frequency of bus stops

b. Lower fares for bus tickets

c. Lower prices for airline tickets

d. Higher gasoline prices

e. Lower automobile prices

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6.Suppose when the price of shirts increases from $20 to $25, the quantity supplied
increases. This change is best described as …

a. movement along a supply curve.

b. a change in supply.

c. movement along a demand curve.

d. a change in demand.

e. none of the above.

7. Which one of the following statements is false?

a. Demand curves tend to slope downward.

b. The relationship between price and quantity demanded is generally positive.

c. The relationship between price and quantity supplied is generally direct.

d. At equilibrium, the quantity demanded equals the quantity supplied.

e. A shortage occurs when the quantity demanded exceeds the quantity supplied.

8. Which of the following is not an example of a “nonprice determinant of supply”

of handmade rugs?

a. Available technology for making rugs.

b. The price of looms for weaving rugs.

c. Number of rug producers.

d. Price of related goods and services.

e. Price of handmade rugs.

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9. Which of the following is an example of movement along a supply curve?

a. The quantity of apples offered for sale increases as the price of apples rises.

b. An apple orchard burns down in an accidental fire, decreasing the number of

suppliers on the market.

c. Thanks to good weather conditions, apple growers enjoy a bumper crop this
year.

d. The price of pears doubles, increasing demand for apples.

e. The price of fertilizer increases, making it more expensive to produce apples.

10. Which of the following statements is true?

a. Markets respond to both effective and latent demand.

b. Markets respond to demand, even if that demand is not backed up by cash.

c. Markets respond only to wants or needs that are backed up by the ability to pay.

d. Demand curves represent "effective demand" only.

e. Both c and d are true

True or False

1. The price of limes could be a nonprice determinant of the supply of lemons. ( )

2. The demand curve for a good shows the same information as the demand
schedule. ( )

3. Tastes and preferences act as nonprice determinants of demand. ( )

4. In general, an increase in demand tends to increase equilibrium price and

decrease equilibrium quantity. ( )

5. If both supply and demand increase, the price of the good will also increase. ( )

(25 points)

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Question Two
Use economic analysis to determine what happens to the price and quantity of
cereal in each scenario.
# Change Graph Economic Analysis

1 1. Draw and Label Equilibrium:

2. The Change:

The workers who produce Supply or Demand

cereal go on strike. Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

2 1. Draw and Label Equilibrium:

2. The Change:
The economy goes into a
recession causing incomes Supply or Demand
to decrease (Assume cereal Increase or Decrease
is a normal good).
Shifter

3. After: Price _____ Quantity_____

3 1. Draw and Label Equilibrium:

2. The Change:

The price of milk, a Supply or Demand

complement to cereal,
decreases (Analyze cereal). Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

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4. 1. Draw and Label Equilibrium:

2. The Change:
The price of wheat and
corn, key resources in the Supply or Demand
production of cereal, Increase or Decrease
decreases.
Shifter

3. After: Price _____ Quantity_____

5. 1. Draw and Label Equilibrium:

2. The Change:

Cereal producers increase Supply or Demand

the price of cereal. Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

6. 1. Draw and Label Equilibrium:

2. The Change:
A reputable private
research institute Supply or Demand
announces that children
who eat cereal improve Increase or Decrease
their grades in school.
Shifter

3. After: Price _____ Quantity_____

7. 1. Draw and Label Equilibrium:

2. The Change:

The government places a Supply or Demand

per-unit tax on cereal
manufacturers. Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

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8. 1. Draw and Label Equilibrium:

2. The Change:

Supply or Demand
An improvement in
equipment and technology Increase or Decrease
for cereal firms.
Shifter

3. After: Price _____ Quantity_____

9. 1. Draw and Label Equilibrium:

2. The Change:

The supply of eggs, a close Supply or Demand

substitute of cereal,
increases. (Analyze cereal) Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

10 1. Draw and Label Equilibrium:

2. The Change:

An increase in population Supply or Demand

leading to an increase in
cereal customers Increase or Decrease

Shifter

3. After: Price _____ Quantity_____

(20 points)

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Question Three

Suppose that the market for milk can be represented by the following equations:

Demand: P = 12 – 0.5QD

Supply: P = 0.1QS

Where P is the price per gallon, and Q represents quantity of milk, represented in
millions of gallons of milk consumed per day.

a) Calculate the equilibrium price and quantity of milk.

b) To help dairy farmers, the government sets a minimum price of $2.50 per gallon
of milk. What is the new quantity of milk sold in the marketplace?

c) Illustrate your answers to (a) and (b) on a graph. Using this graph, calculate how
the consumer surplus and producer surplus change after the price supports are
enacted. Also calculate any deadweight loss that results.

d) Suppose that the government supports the $2.50 per gallon price by purchasing
any excess milk suppliers make available but are unable to sell to consumers. How
much milk must the government buy?

(15 points)

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Question Three

Fill in the Blank

1. A curve indicating the quantities that buyers are willing to purchase at various
prices is known as a(n) ________________ curve.

2. Mark would like to buy a new car for $20,000. However, he doesn't have any
savings and he doesn't qualify for a loan. Thus, his desire for a car does not
translate into ___________________ demand.

3. Tabitha needs furniture for her room. She is deciding between a medium-sized
couch and a large armchair. Either the couch or the armchair could fulfill her need
for sitting space in the room. The couch and the armchair can be referred to as
___________________ goods.

4. When people eat french fries, they like to put ketchup on them. Due to an
increase in the price of french fries, total sales of french fries decrease. At the same
time, ketchup sales also decrease. This phenomenon can be explained by noting
that French fries and ketchup are ____________________ goods.

5. Surplus and shortage are both instances of ____________________.

(25 points)

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Question Four

Suppose the demand curve for sweatshirts is given by:

price Quantity D'

Demanded per
year
10 4000
20 3200
30 2400
40 1600
50 800
60 0
Suppose the supply curve for sweatshirts is given by:
price Quantity S'
Supplied per year
10 400
20 800
30 1200
40 1600
50 2000
60 2400
a) Graph the supply for sweatshirts

b) Suppose the price of cotton (a production input for sweatshirts) falls such
that at each price, quantity supplied changes by 1200 units. Complete the
column of the supply table labeled S'.
c) What is the new equilibrium price? $30 quantity?
d) Starting with the original demand and supply figures, suppose that the price
of sweatpants ( a compliment consumption good to sweatshirts) falls. As a
result, the quantity of MSU sweatshirts demanded changes by 1200 at each
price.
e) What is the new equilibrium price? $50 quantity?

(25 points)

Good luck

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