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Unformatted text preview: Suppose we give Carley the opportunity to join a village food co-op. The membership fee is $120. Members can then buy food for $9 per unit and clothing for $6 per unit. (b) Illustrate on your graph for part (a) how joining the co-op affects Carley's budget- line/indifference-curve diagram. Should she join the co-op? Explain. If she joins the co-op and re-optimizes, what will be the value of the MRS of food for clothing at the new equilibrium bundle? If she decides to join the co-op, what is the MRS of food for clothing at the original optimal bundle? 2. Jack, Jill, and John have identical demand curves. Jacks demand curve for wine is given by the equation Q D = 30 - P/3, where price is given in dollars and quantity is measured in bottles. (a) Draw the market demand curve for wine. (b) Calculate total consumers' surplus if wine is sold at $20 a bottle....
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- Fall '06