5. (6 points) Suppose when we look at the monthly sales of hamburgers & fries in the Devil's Den, we see that when CCSU increased the price from $7 to $13, the quantity demanded fell from 8,000 meals to 4,000 meals.

b) If the total production matrix was not what you found above, but instead was given by:

1. The graph below shows the market for the MTA one-way tickets during off-peak hours. 2.1. The authorities concerned with the wellbeing of the passengers cap the price per ticket to $8. What is the effect of this policy on the market for MTA one-way off-peak tickets? Briefly explain. A. 2.2. The MTA administration (worried that its revenues won't cover its operating cost) successfully lobby the authorities to institute a price floor of SS. What is the effect of this policy? Briefly explain.

2. Steven buys an iPhone for $550 and gets a consumer surplus of $80. 3.1. What is Steven's willingness to pay? Show your calculations. 3.2. What is seller's willingness to sell if the costs of production per iPhone are $385? Show your calculations. 3.3. If Steven had bought the iPhone on sale for $490, what would his consumer surplus have been? Show your calculations. 3.4. If the price of an iPhone were $800, what would Steven's consumer surplus have been? Show your calculations.

3 . The graph below represents the gasoline industry. Answer the next questions using this graph. 4.1. Does the industry create a negative or positive externality? Briefly explain. 4.2. Without any government intervention, what are the equilibrium price and quantity? 4.3. What are the socially optimal price and quantity? 4.4. What is the size of the external cost in this market? 4.5. Give an example of a policy that would internalize this external cost in this industry. Briefly explain.

If a consumer places a value of $200 on a plane ticket to Florida and if the price of the ticket is $250, then the a consumer has consumer surplus of $50 if he buys the good. b consumer does not purchase the good. c price of the good will rise due to market forces. d market is out of equilibrium.

For Question 1, consider the New England market for electricity prior to Winter 2022-23 by considering this setting roughly one year ago, in December 2021. Assume that in December of 2021, the market for electricity was in a short-run equilibrium. Draw a graph that shows supply and demand for electricity market in its December 2021 equilibrium. This graph will serve as a starting point for your analysis in Questions 2 through 5. • When drawing this graph, please assume that the demand curve is downward sloping and supply curve is upward sloping. • Clearly show the market equilibrium in December 2021, labeling the equilibrium price and quantity. • Please remember to clearly label your axes, with P on the vertical axis and Q on the horizontal axis. • Label the supply curve as So; demand curve as Do: the equilibrium price as Po; and the equilibrium quantity as Qo'

Question 4: In Question 1, you established the original equilibrium in the New England market for electricity in December 2021 and determined the equilibrium price (Po) and equilibrium quantity (Q₁). In Question 2 and 3 you applied two additional changes: a change that took place in late February 2022 (Question 2) and the change expected to occur in Winter 2022-23 (Question 3). You further found the expected final equilibrium price (P₂) and the equilibrium quantity (Q₂). • Considering your analysis, can you state with certainty that Q₂ is greater than, same as, or less than Qo? Why or why not? • Similarly, can you state with certainty that P₂ is greater than, same as, or less than Po? Why or why not? If any of your predictions about the cumulative impact of these shifts on either the equilibrium price or quantity (or both) are uncertain (ambiguous), what will determine the final outcome? Please make sure you relate your explanation to the graphical analysis you have offered in Questions 2 and 3.

Question 2: At the end of February 2022 and thereafter, the Russian invasion of Ukraine had a significant impact on energy markets. As a result, natural gas prices increased across most of the world. Higher natural gas prices had increased the cost of producing electricity since natural gas is used as fuel by many power plants. Analyze what happened to the market for electricity in New England in late February 2022. Assume that the heating season temperatures in the region, which influence the use of electricity by consumers, had not changed between December 2021 and late February 2022. • Using your graph from Question 1, depict the changes that have taken place in the electricity market. Clearly show any shifts in demand and/or supply curve(s). Label any curves that have shifted as D₁ and/or S₁; and show the direction of the shift graphically with an arrow. • Clearly show the new market equilibrium if it has changed from your answer to Question 1. Label the new equilibrium price as P, and equilibrium quantity as Q₁.

Question 3: Please refer to your graph in Question 2. You have been asked to analyze what will happen to the New England market for electricity if the Winter 2022-23 (December 2022 through February 2023) results in much colder temperatures than Winter 2021-22 (December 2021 through February 2022), causing all residential customers to scramble for more electricity than they would typically need to heat their homes. • Using your graph from Question 2, analyze the impact of this change in consumer desire for more electricity. Clearly show any shifts in demand and/or supply curve(s) that came about because of this exit. Label any shifted curves as D₂and/or S₂. • Clearly show the new market equilibrium. Label the new equilibrium price as P₂ and equilibrium quantity transacted as Q₂.