1. Assume a demand and supply curve have the following slopes:

Demand curve: 100 – .75q
Supply curve (marginal cost): 10

Graph and Label the equilibrium (price and quantity)
From the equilibrium, calculate the following:
a. Total consumer surplus
b. Total producer surplus
c. Total surplus

Change the curves to the following:

Demand curve: 150 – q2 + 2q
Supply curve: 6 + 2q

Find the Equilibrium (price and quantity)

1. Preform a benefit/cost analysis on the following project:

Expected costs: $5,000 today, $6,000 a year from today, and $5,000 two years from today

Expected revenue: $7,000 five years from today, $6,000 seven years from today, and $8,000 ten years from today.
Assume a 5% discount rate

Find:
a. The Net Present Value (NPV) of the project
b. The benefit/cost ratio
c. Is the project worth undertaking?

1. Suppose 20 balls are placed in a bag. 10 balls are red, 9 balls are yellow and 1 ball is green. If you draw a red ball you must pay $5. If you draw a yellow ball you get $1. If you draw the green ball you get $50. Find the expected payout of this game and tell me if you are willing to play it. What does this say about your preference for risk (use the terms we discussed in class?