Midterm ReviewAdditional Problem #3: Consumer and Producer Surplus Now consider the market for pizza. Suppose that the market demand for pizza is given by theequation P = 40 – 4QD, and the market supply for pizza is given by the equation P = 10 + 2QS, whereQD = quantity demanded, QS = quantity supplied, P = price consumers pay (per pizza) and the priceproducers receive (per pizza).Graph the supply and demand schedules for pizza and indicate the equilibrium price and quantity.(Your answer must contain your complete algebraic solution). Calculate the consumer surplus andproducer surplus and identify these areas in the graph below.(Be sure to label the axes and functions,and number your intercepts.)Equilibrium Price: Equilibrium Quantity: (Show your complete algebraic solution for the equilibrium price and quantity in thespace below.)Consumer Surplus at Equilibrium: (Show all work.)Producer Surplus at Equilibrium: (Show all work.)400 1000 1200 1200Additional Problem #1: Consumer and Producer SurplusThe graph below shows the demand and supply of rental housing for Microtown. $/month S 800 600 200 D Quantity 0 1 2 3 4 5 6 (thousands/month a) What is the equilibrium rent/month? ______________; the total rent/month atthe equilibrium quantity of rental units? _______________; the consumersurplus? _______________; the producer surplus? _______________.b) What is the quantity of apartments that will be rented if a price ceiling is set at$800? _________. What is the quantity of apartments that will be rented if aprice ceiling is set at $400? _________. What is the consumer surplus giventhis price ceiling? _________________; the producer surplus?_______________; the dead weight loss? ____________________; the searchcost for rental? ____________.20 50 1200200Additional Problem #2: Consumer and Producer SurplusThe graph below shows the market for anti-freeze. The government imposes a sales tax onsellers of T. $/gallon a S + T S 40 30 10 D Quantity 0 1 2 3 4 5 6 (thousands of gallons) a) What is the equilibrium price/gallon without the tax? ______________; theequilibrium quantity without the tax? __________________.b) What is the tax per gallon? ______________. How much revenue will the salestax raise? ______________. c) The tax decreases consumption by? ____________.d) What is the consumer surplus before the tax? _________________; after the tax?_______________. What is the producer surplus before the tax?____________; after the tax? _______________. What is the dead weight lossassociated with the tax? ____________________.Additional Problem 3: Market AnalysisConsider the market for bus service. First draw a graph depicting market equilibrium for busservice. Then, for each of the events given below, analyze what effects each event will have on themarket equilibrium for bus service, i.e. effect on equilibrium price, equilibrium quantity, demandor quantity demanded, supply or quantity supplied. You must draw separate graphs for each of thefollowing events. Remember to label all axes, functions, and equilibrium points in your graphprecisely.(a) Bus drivers go on strike in order to pressure their employers for wage increases.(b) The number of parking spaces decreases due to new land use planning requirements.(c) Employers with 100 or more employees offer subsidized bus passes to their employees.(d) Two thousand miles of Metrolink and commuter rail service are opened.(e) Congestion on the freeways increases with no plans to fund construction of new freewaylanes.Additional Problem 2: ElasticityFor each of the elasticity cases given below, verbally explain what the elasticity coefficient means, and offer an interpretation of the elasticity coefficient.(a) The income elasticity of movies is 3.41.(b) The price elasticity of tobacco is -0.61.(c) The cross price elasticity of popcorn with respect to the price of soft drinks is 2.38.(d) The price elasticity of rail service is 0.89.(e) The income elasticity of dental services is 1.00.Handout 2: Market AnalysisThe table below gives the individual demands’ of Lisa and Chuck for movies:Quantity of movies demanded / mo.Price / movie Lisa Chuck$7 1 06 2 05 3 04 4 13 5 22 6 3a) Calculate the market demand for movies assuming that only Lisa and Chuck have individual demands for movies. Explain this market demand.b) Graph the market demand for movies found in (a). Does this market demand follow the “law of demand.”? Explain and offer reasons for this law.c) Calculate the price elasticity of demand for movies given your market demand in (a) for each price change. Is demand elastic, unit elastic, inelastic? Explain in detail. (Show all your workand give the complete elasticity formula).d) Now, assume that 7 movies are offered per month. (1) Determine the market price for each movie. Explain your reasoning. (2) If Chuck’s demand for movies increases, as shown below, calculate the new market price for movies if 7 movies are offered per month.Quantity of movies demanded/moPrice / movie Chuck$7 06 05 14 33 42 6What factor or factors could have increased Chuck’s demand for movies?Handout 1: Production PossibilitiesA certain economy only produces two goods, calculators (C) and tea (T). To manufacture thesegoods, it has three kinds of resources: (1) a fixed quantity of capital, useful only in producingcalculators; (2) a fixed