Economics demand is extremely inelastic

Part 1: From the book, Answer discussion questions 5.4 & 5.5 p 99, as follows

Question 1: No. 5.4. from the book. Using figure 5.3 as a basis, construct a set of
four figures to show the effect of an increase in the demand for tanker service
on the market price when:
(a) demand is extremely inelastic,
(b) demand is extremely elastic,
(c) supply is extremely inelastic, and
(d) supply is extremely elastic.

Question 2: No. 5.5 from the book. Manufacturers of cardboard cartons and other
packaging use inputs of wood pulp and wastepaper. An issue in environmental
policy is the effectiveness of price incentives in encouraging households and
businesses to recycle wastepaper. The price elasticity of the demand for
wastepaper has been estimated to be -0.07, while the price elasticity of the supply
has been estimated to be 0.  (Source: John A. Edgren and Kemper W. Moreland,
“An Econometric Analysis of Paper and Wastepaper Markets”, Resources and
Energy, Vol. 11, 1989, pp. 299-319.)

(a) Consider a government policy that reduces the price of wastepaper to
manufacturers by 5%. How will this affect the quantity demanded?
(b) Consider a government policy that increases the price of wastepaper to sellers
by 5%. How will this affect the quantity supplied?
(c) Are price incentives an effective way of increasing the recycling of
wastepaper?

Part 2: Answer Questions 3, 4 & 5 as follows:
Question 3: Production costs consists of several components. Fill the empty cells in the
following table.
Quantity of
Output (q)
Fixed
Costs
(TFC)
Variable
Costs
(TVC)

Total
Costs
(TC)
Marginal
Costs
(MC)
Average
Costs
(AC)
Average
Fixed Costs
(AFC)
Average
Variable Costs
(AVC)
0  55  0

—  —  —
1    30

2    55

3    75

4    105

5    155

6    225

7    315

8    425

C 3.11 – Appendix III: Assessment Instrument Cover Sheet

Question 4: Find the profit-maximizing output (Q*) for a purely competitive firm, if the price of
a unit is 131 Dhs, given the following:

Quantity
of
Output
(q)
Fixed
Costs
(FC)
Variable
Costs
(VC)
Total Costs
(TC)
Marginal
Costs
(MC)
Total
Revenues
(P * q)
Marginal
Revenues
(MR)
Profit/loss
0  011  0  011       1
1    01    001    131
2    170
3    240
4      400

5    370

6    450
7    540
8        110
9    081
01    031

Question 5:
Mars Inc. produces 100,000 boxes of Snickers bars which sell for $4 a box.  If variable costs are $3
per box, and it has $150,000 fixed operating costs, in the short run. A) Is the firm losing or making
money?  B)  if  the  firm  is  losing  money, should the firm  continue  or  shut  down its  operations?
Explain your answers using the theory you know.