1. Suppose the supply curve for a product is given by Qy s = -10 + 10Py + 2Px and Py = 5, Px = 2 .
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a. How much of y is produced?
b. What is the inverse supply curve for y given the above information?
c. Graph this supply curve.
d. Show what happens to this supply curve if the price of Y goes up by $10.
2. In the production process, inputs are usually related to each other. Consider the market for two goods that are complements; ink and printer. If a technological breakthrough reduced the cost of producing ink:
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a. What would happen to the supply of ink?
b. What would happen to the price of ink and the quantity exchanged?
c. What effect would this change in the price of ink have on the market for printer?
3. When the US liberated Libya, the market price of crude petroleum declined from $30.00 per barrel to $20.00 per barrel - a decrease of almost 33 percent. Your boss is puzzled, because the price decrease actually occurred before there was a physical increase in the current amount of oil available for sale.
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a. Explain why the price of oil decreased so rapidly.
b. Six months after the liberation, the price of oil increase to $30.00 per barrel, its prewar level. Explain why.