2. Assume Micah spends $14 on burgers and slices of pizza every week.
A burger costs $4
and a slice of pizza is $2. Using the chart, answer the following questions.
Marginal Utility Marginal Utility
Total Units of a Burger of a Slice of Pizza
1 20 12
2 16 10
3 12 8
4 8 6
5 4 4
(a) What is the total utility of consuming 4 burgers?
(b) What is the quantity of burgers and slices of pizza that will maximize Micah’s utility
given that he spends $14?
(c) Now suppose a 10% increase in the price of a burger leads to a 5% increase in the
quantity of slices of pizza purchased. Calculate the cross-price elasticity between
burgers and pizza, and note if burgers and pizza are complements, substitutes, or
inferior goods. Show your work.
3. Analyze the following graph of the price of sugar in the United States before and after a
tariff is imposed.
P/$
$8
Domestic Supply
$4
$3 World Price
w/Tariff
World Price
$2
Domestic Demand
20 30 40 50 60 Q
Sugar Market with Trade Before and After
Sugar Market with Trade Before and After Tariff
(a) What is the price of sugar if there is no trade?
(b) Calculate the total consumer surplus both without trade and at the world price
without a tariff. Show your work.
(c) Calculate the total tariff revenue at the world price with a tariff. Show your work. &
(d) What is the quantity of domestic supply at the world price both with and without
a tariff?
88 AP MICROECONOMICS/MACROECONOMICS
