Assignment:
1. In the court case Apple Inc. v. Pepper (2019), a group of iPhone owners sued Apple for vio-lating antitrust law by charging developers a fee of 30% per app sold on the app store. Apple argued at the Supreme Court that n pp purchasers could not sue because the fee is charged to developers, and therefore does not afflict purchasers. Ignoring the legal considerations, what do you think about the economics behind Apple's argument? (Select one)
(a) Agree: The fee is just like a transfer from developers to Apple.
(b) Agree: The fee will lower producer surplus but not affect consumer surplus,
(c) Agree: Consumers can avoid the fee by substituting to other goods.
(d) Agree: The fee is a barrier to entry that raises producer surplus.
(e) Disagree: Apps are normal good so consumers will pay more for them.
(f) Disagree: The incidence of the fee will be split between producers and consumers.
(g) Disagree: The equivalent variation of the fee is less than the price of the app.
(h) Uncertain: It depends on consumers' marginal rate of substitution.
(i) Uncertain: It depends on whether apps are a luxury or necessity good.
(j) Uncertain: It depends on whether there is symmetric 'demotion about the fee.
2. You're buying a birthday gift for a close friend., and decide to get them a $25 gift card to Sam's Mediterranean Cuisine because you know they eat there frequently. If a meal at Sam's typically costs $8 and you know they will eat at Sam's 5 more times before the summer, what is the equivalent variation of your gift card? (Select one)
(a) More than $25: Restaurant meals are luxury goods so the income elasticity is > 1.
(b) $25: Gift cards are always worth their cash value.
(c) $25: The gift card is like an inframarginal in-kind transfer.
(d) Less than $25: The equivalent variation of a gift card is less than the cash value.
(e) Less than $25: Your friend may substitute to a different restaurant.
(f) $15: That is the money spent at Sam's minus the cash value of the card.
(g) $8: That is the equivalent variation of each meal at Sam's.
(h) $0: The card will not change your friend's behavior and therefore doesn't affect utility. (1) Uncertain: It depends on your friend's marginal rate of substitution.
i) Uncertain: Utility is not expressed in units that can be meaningfully quantified.
3. A coffee shop currently earns $60k per year in revenue and pays $10k per year in rent and labor costs. The owner is thinking of converting it into a sit-down restaurant. If she does, she anticipates that she would need to take out a $150k loan for the upgrades, on which she would owe interest of $20k per year. With this loan, she could open a restaurant that makes $100k in annual revenue while keeping her rent and labor costs at $10k per year. What would be the annual economic profits from converting to a restaurant? (Select one)
(a) $100k: That is the revenue from the restaurant.
(b) $90k: That is the upgrade value minus opportunity cost.
(c) $70k: That is the revenue minus accounting cost.
(d) $70k: That is the upgrade value minus the economic cost.
(e) $50k: That is the revenue minus the fixed cost.
(f) $40k: That is the revenue minus opportunity cost.
(g) $20k: That is the revenue minus variable cost.
(h) $10k: That is the revenue minus the sum of costs. $0: In the long run, all producers must earn zero economic profits.
(i) $50k: That is the revenue minus the total cost of the loan.
4. When Gulliver arrived in Lilliput he was a giant to the island's tiny people, with an appetite equal to 1,724 regular Lilliputians. Suppose he drank hogshead, his favorite drink, at every meal. Also suppose eggs are a complement to hogshead for consumers in Lilliput, but Gulliver himself did not eat any eggs. Which of these might have happened in the markets for hogshead and eggs while Gulliver lived in Lilliput?
(Select all)
(a) The demand curve for hogshead increased (shifted out).
(b) The quantity demanded of hogshead increased.
(c) The supply curve for hogshead increased (shifted out).
(d) The quantity supplied of hogshead increased.
(e) The price of hogshead increased.
(f) The price of hogshead decreased.
(g) There was a Preto improving shift in the hogshead marke.
(h) The demand curve for eggs increased (shifted out).
(i) The demand curve for eggs remained the same.
(j) The demand curve for eggs decreased (shifted in).