Microeconomics
Fall 2025
Prof. Wei-jen Wen
Problem Set #1
Due Sep. 10
1. Iran sets a quota of Q̄ = 6 million tons on foreign wheat imports. The Iranian
domestic supply curve of wheat is given by Qds = 5p − 15 and the foreign supply curve
Qfs = 2p, where the quantities are in millions of tons. How much wheat would domestic
and foreign producers supply at a price of 5, both with and without the quota?
2. Use calculus to derive the price elasticity of supply if the supply function is Q = Bp0.5 .
3. If the inverse demand function is p = a − bQ and the inverse supply function is
p = c + dQ, show that the incidence of a specific tax of t per unit falling on consumers is
b/(b + d) = η/(η − ϵ), where η and ϵ respectively denote the price elasticities of supply
and demand.