Homework 1 Questions Managerial Economics BA 445 A.1 Market Equilibrium Question 1: You are a manager of an organization that distributes blood to hospitals in America. A recent report indicates that nearly 50 Americans contract HIV each year through blood transfusions. Although every pint of blood donated in America undergoes nine different tests, existing screening methods are not perfect. The current price of blood is $70 per pint. Researchers have developed new screening methods that will detect all contaminated blood. As a result, the demand and supply for blood changes to Qd = 175 – P and Qs = 2P – 200. Compute the new equilibrium price and quantity. And compute the new consumer surplus and producer surplus. Graph your findings. Answer to Question:Homework 1 Questions Managerial Economics BA 445 A.1 Market Equilibrium Question 2: Suppose there are four people interested in buying a pair of shoes: The first is willing to pay up to $11.00 for a pair of shoes; the second, up to $8.00; the third, up to $6.00; and the fourth, up to $4.00 Also suppose there are three people interested in selling a pair of shoes: The first is willing to sell for as little as $10.00 for a pair of shoes; the second, as little as $6.50; and the third, as little as $4.00 Compute the competitive-equilibrium price of shoes if all those people trade shoes on eBay. Tip: Notice that both demand and supply are in discrete units, so you must connect discrete points to form demand and supply curves, as in the class lesson. Answer to Question:Homework 1 Questions Managerial Economics BA 445 A.2 Price Restrictions Question 3: SAN FRANCISCO (CNN) -- Online shoppers who frequent the Internet auction site eBay are used to seeing a wide variety of things for sale. Still, the notice of a "fully functional kidney" put up on the site last week created a stir. It also brought in bids of more than $5.7 million before the company intervened to block the sale. While donating human organs is encouraged, trafficking in human organs is a federal felony, punishable by a minimum of five years in prison and fines of $50,000 or more. Steve Westly, eBay's vice president of marketing, said "eBay has zero tolerance for illegal items on the site." He added that "We have a very clear policy against this." The seller, who gave his home as Sunrise, Florida, posted the following notice: "Fully functional kidney for sale. You can choose either kidney. Buyer pays all transplant and medical costs. Of course only one for sale, as I need the other one to live. Serious bids only." What effect will that law about trafficking in human organs have in the marketplace? What would happen in the marketplace if the law were removed? Explain your answers. Answer to Question:Homework 1 Questions Managerial Economics BA 445 A.2 Price Restrictions Question 4: Suppose demand and supply for a commodity are Qd = – P + 20 and Qs = 2P – 10 a. For that commodity, compute equilibrium price, quantity, consumer surplus, and producer surplus. b. Suppose that commodity with Qd = – P + 20 and Qs = 2P – 10 were unskilled labor and a minimum wage of $15 is imposed. Compute the effect of that minimum wage on the unskilled labor. c. Now instead of labor, suppose that commodity with Qd = – P + 20 and Qs = 2P – 10 were medical care and a maximum price of $6 is imposed to make medical care more affordable. Compute the effect of that maximum price on those seeking medical care. Explain your answers. Answer to