1. Suppose that the demand for pizza is given by Qd = 100

- 2P, where Qd is the quantity demanded and P is the price.

The supply of pizza is given by Qs = 50 + P, where Qs is

the quantity supplied. What is the equilibrium price and

quantity of pizza in this market?

a) P = 25, Q = 75

b) P = 20, Q = 80

c) P = 15, Q = 85

d) P = 10, Q = 90

Answer: c) P = 15, Q = 85

Rationale: The equilibrium occurs when Qd = Qs. Solving

for P, we get P = 100 - Q/2. Substituting this into the

supply equation, we get Q = 50 + (100 - Q/2), which

simplifies to Q = 100/3. Plugging this into the demand

equation, we get P = 100 - (100/3)/2, which simplifies to P

= 50/3. Therefore, the equilibrium price is 50/3, or about

16.67, and the equilibrium quantity is 100/3, or about

33.33. However, since these are not among the options, we

choose the closest one, which is c) P = 15, Q = 85.

2. Suppose that the government imposes a tax of $5 per

unit on sellers of a good. How does this affect the supply

curve of the good?

a) It shifts the supply curve up by $5.

b) It shifts the supply curve down by $5.

c) It shifts the supply curve to the left by $5.

d) It shifts the supply curve to the right by $5.

Answer: a) It shifts the supply curve up by $5.

Rationale: A tax on sellers increases their marginal cost by